Two years ago, Atlanta homeowner Dorothy Williams got a reverse mortgage, which she used to pay off doctors' bills for treatment of a back injury. "The reverse mortgage really helped me out," says Williams, 78. Williams benefited so much from her first reverse mortgage that she decided to refinance her old one this spring with a new one.

Current high home values and low interest rates make the present an optimal time for older homeowners to refinance reverse mortgages. By doing so, they can usually obtain larger loans. The growth in home values is especially apparent in the Atlanta metropolitan area.

Over the past two years, the value of Williams' 3-bedroom, 1-bath, ranch-style home has increased by $24,000 to $77,000.

In refinancing, Williams obtained a new reverse mortgage—this time taking it out as a line of credit. In addition to using some of the proceeds to pay off her old loan, she used another $3,000 to replace the copper pipes in her home, which she has lived
in for 35 years.

"It was going to cost me more than $3,000, which I didn't have," added Williams, noting she still has some money left. "But I'm not going to use it unless I have to," she says.

Recognizing the benefits that seniors can reap from refinancing a reverse mortgage, the U.S. Department of Housing and Urban Development has implemented a new regulation that makes it less costly for a senior to refinance a reverse mortgage. (Note: The regulation had not yet been implemented when Ms. Williams refinanced her loan.)

Instead of paying the full upfront mortgage insurance premium (MIP) on a refinanced reverse mortgage, the regulation would enable a borrower to be credited for the amount of MIP paid on the first loan. For example, the MIP paid by Ms. Williams on her initial loan totaled $1,060; on the refinanced HECM the amount totaled $1,540. Had the rule been in effect at the time Ms. Williams refinanced her loan, the amount of new MIP would have totaled just $480.