Finance of America Reverse: A Review

If I were getting a reverse mortgage this month, Finance of America Reverse would make my shortlist.

Like other lenders, Finance of America Reverse sells federally backed reverse mortgages. But the lender specializes in another kind of reverse mortgage: proprietary loans that tap into even more of your equity.

Let’s take a closer look at this company and its reverse mortgage products.

About Finance of America Reverse Mortgages

The Blackstone Group owns Finance of America which offers reverse mortgages through a subsidiary named Finance of America Reverse, or FAR. Based on Oklahoma, Finance of America Reverse has branches in most states and in Puerto Rico. 

Shoppers in the Dakotas, Montana, Hawaii, Arkansas, Nebraska, and the northern reaches of New England may have trouble finding a branch. Almost everyone else in the nation can find a branch and speak with a Finance of America Reverse (FAR) advisor in their town or within a reasonable drive.

I point this out because FAR prioritizes making personal connections with potential customers. As a result, you’ll have a much easier time making an appointment over the phone than applying online.

Quick Nav: Finance of America Reverse

• How FAR Is Different
• More About HomeSafe
• Cost of FAR
• HECM Loans

What Sets Finance of America Reverse Apart

The growing number of reverse mortgage firms — combined with the federal government’s regulations capping fees and influencing interest rates — has made it harder for reverse mortgage brokers to distinguish themselves in the market.

FAR is unique because of its wide variety of proprietary loans. FAR markets these products, also called jumbo reverse mortgages, under the brand name HomeSafe. FAR’s HomeSafe loans can free up significantly more of your equity than a federally backed HECM loan which tops out at $726,525 in 2019.

Since proprietary loans do not follow this FHA regulation, borrowers who have high-value homes can access up to $4 million in equity with a HomeSafe reverse mortgage.

More About HomeSafe Reverse Mortgages

Many lenders offer a proprietary reverse mortgage option. FAR stands out because it allows a lot of choice and flexibility within its HomeSafe line of products:

• HomeSafe Standard: Trades your equity for a single, lump-sum payment.
• HomeSafe Flex: Pays 60 percent of your loan as a lump sum. The other 40 percent is paid monthly over five years.
• HomeSafe For Purchase: Converts your equity into cash to use if you’re buying another property. 
• HomeSafe Select: An adjustable-rate option that could help shorter-term borrowers save on interest charges while still maximizing the loan; available only in California.
• HomeSafe Second: A reverse mortgage that works like a second mortgage except without the monthly payments. You could use it to renovate your home. Your primary mortgage doesn’t have to be paid off to qualify.

No other lender presents this much variety in its proprietary reverse mortgage loans. But keep in mind: Not every option will be available in every state. FAR is working to increase these loans’ availability. 

The Costs of a Finance of America Reverse Mortgage

Loan costs vary depending on whether you’re getting a HomeSafe proprietary loan or a standard HECM through the Federal Housing Authority.

• Mortgage Insurance: HECM loans require you to pay annual mortgage insurance premiums of 2 percent of your loan’s balance the first year followed by 0.5 percent a year each subsequent year. HomeSafe loans do not require this insurance.
• Appraisal: Before borrowing against your equity, your lender will want to know exactly how much equity you have. To find out, you’ll need an appraisal which can cost $200 to $600. Both HECM and HomeSafe loans require an appraisal, and you’ll need to pay this cost out of pocket. 
• Closing Costs: If you’re using your reverse mortgage to buy another property, expect to pay closing costs on the new property. Even a standard reverse mortgage will incur some closing costs which can be folded into the loan.
• Origination Fees: Loan origination fees may be the biggest expenses you’ll face with a reverse mortgage. HECM loans’ origination fees will range from $2,500 to $6,000 depending on your loan amount. HomeSafe loans could cost up to $8,000 to originate. Many borrowers pay this fee with proceeds from the loan.
• Interest Charges: You won’t be making payments on a reverse mortgage, so the interest charges will continue to build throughout the life of the loan. Reverse mortgage rates tend to mirror conventional mortgage rates.

Because many costs can be absorbed into your new debt, a reverse mortgage can seem like a great deal. “The bank pays you,” is a common selling point.

Eventually, you (or your heirs after you die) will feel the costs. The loan — including all the costs built into it — will have to be paid off if you stop using the home as your primary residence if you sell the home, or after you pass away.  

How to Access a Finance of America Reverse Mortgage

FAR maintains an up-to-date web site with FAQs, loan details, and even a feature designed to direct you to the loan most likely to meet your specific needs. When you want to apply for a loan, however, FAR’s online tools will seem lacking. In fact, you’ll be directed to a phone number or the physical address of the company advisor nearest you.

FAR doesn’t encourage online applications for a couple of reasons:

• Customer Age: You must be 62 or older to be eligible for a reverse mortgage. Yes, many 62+-year-olds live and work online just like us GenXers and millennials. But older shoppers more often appreciate a personal connection.
• A Personal Approach: Even as it has grown into the second biggest reverse mortgage provider, FAR still prefers to interact with its customers on a one-on-one basis. This works better in a physical office or over the phone. 

If you have a strong preference for interacting with your lender online, FAR may not be your best option.

Finance of America Reverse HECM Loans

I’ve talked a lot about proprietary loans because FAR excels with these. Most customers, however, still want a federally insured Home Equity Conversion Mortgage (HECM). 

Finance of America Reverse does well with standard HECMs, too:

• Options: Like AAG, FAR can pay your loan as a lump sum, as term payments each month, or as a line of credit.
• Interest Rates: You could get a fixed-rate or an adjustable-rate mortgage. An ARM may make sense if you plan to keep the loan for only a couple of years.
• Borrowing Limit: The FHA recently increased the borrowing limit on HECMs to $726,525 — still plenty of money for most customers.
• Counseling: FAR requires most customers to go through a brief counseling session to make sure customers understand the debt they’re taking on.

As with FAR’s HomeSafe loans, you’ll have more success calling customer service than trying to shop online with FAR’s HECM loans.

And, you’ll see some additional fees with HECMs, such as federal mortgage insurance premiums which shouldn’t exceed 2 percent of your loan the first year and 0.5 percent of your balance the following years.

Bottom Line: FAR Is a Solid Choice

Reverse mortgages are expensive, and they can be misleading. As you compare loans, make sure you’re aware of all the costs. Consider discussing options with your adult children or other heirs since your loan could affect them after you die. 

As you compare options, you’ll likely notice that Finance of America Reverse offers some of the best reverse mortgage options in the marketplace.

FAR excels with customer service because it prefers a personalized approach to your loan. This doesn’t mean you can’t have customer service issues; it just means FAR is likely to work toward a resolution.

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