A weakness of the HECM, however, is that it is extremely difficult to use up all or even most of your equity – house value less mortgage debt. This is great for heirs, but not so great for seniors who want to get as much money as possible out of their house, and don't care about leaving anything to their heirs.

The amount of equity a homeowner with a HECM leaves in her estate depends in part on how long she is in the house after the contract is closed. The earlier it is terminated, the smaller the debt and therefore the greater the equity. The owner may have little control over this.

A second factor, which the owner does have control over, is the payment option selected. Assuming the contract terminates before the owner reaches age 100, she will leave the least equity to her estate if she takes a credit line and uses it up in a short period, e.g., two years. If she converts the line into a monthly payment for a term longer than two years, she will leave more equity. If she takes a tenure payment that continues for as long as she lives in the house, she will leave the most equity. However, if she terminates at age 100, the equity will be the same for all the options.

A third factor is the appreciation in the value of the property after the HECM is taken out. Such appreciation affects the size of the estate but not the amounts that the owner can draw under that contract.

The fourth factor is whether the value of the property at the time the HECM was taken out was higher than the FHA loan limit. If it was, the credit line was based on the loan limit, and the excess value lands in the estate as additional equity. However, this excess value along with subsequent appreciation could make it worthwhile to refinance the HECM, as indicated below.

Can a Reverse Mortgage Be Refinanced?

"Is it possible to increase the amount I can draw on my FHA reverse mortgage by refinancing?"

Probably. You are older, your house has probably appreciated, and interest rates are lower now than when you took out your current HECM. All these factors would increase your credit line above what it is now. If the value of your property was higher than the FHA loan limit when you took your current HECM, subsequent increases in the loan limits will also help.

However, refinancing means incurring another set of settlement costs. Your lender may be willing to accept a flat origination fee of $2,000, instead of the charge on new loans, which is the greater of $2,000 and 2 percent of property value – ask! Congress has also authorized HUD to charge mortgage insurance only on the value increase. If your house appreciated from $100,000 to $150,000, for example, the 2 percent refinance premium would be paid only on the $50,000. Unfortunately, HUD has not yet issued the rule required to implement this change.

When you consider a refinance, focus on two numbers: the increase in credit line from the previous HECM, and the refinance cost. You can get these numbers from a lender, or by using any one of the following online calculators: www.rmaarp.com, www.revmort.com, www.nrmla.org and www.ffsenior.com. You must enter your current reverse mortgage debt under "Mortgages and liens on your home."

If it costs $8,000 to refinance and your credit line rises by $40,000, you probably want to do it. If it costs $8,000 but your credit line rises only by $4,000, you probably don't. But you might, if you have zero interest in the size of your estate.