Finance of America Reverse Mortgage Review
- Wide range of reverse mortgage options for homeowners to tap their equity for retirement expenses.
- Qualifying for a reverse mortgage includes an evaluation of eligibility, cost, and property requirements.
- Offers reverse mortgages up to $4 million, similar to a jumbo mortgage.
Founded in 2003, Finance of America Reverse is a market leader for reverse mortgages in the U.S. It helps people find a clear path toward their ideal retirement by accessing their home’s equity. As of February 2024, the company commands about 27% of the market, with 350,000-plus customers and more than $7.4 billion in funded loans each year.
It has such a large market share because it offers a wide variety of reverse mortgages and other home equity lending solutions. People looking for unique reverse mortgage options will likely find them with Finance of America Reverse mortgages.
Table of Contents Skip to Section
Finance of America Reverse mortgage at a glance
Finance of America Reverse is known for its breadth of reverse mortgage products, including a proprietary reverse mortgage for amounts up to $4 million.
| Term | Details |
| Eligible properties | Principal residences |
| Eligible states | Available in 40 states (exclusions listed below*) |
| Loan amounts | Up to $4 million |
| Fees | Origination fee, servicing fees, closing costs, and mortgage insurance premium |
| Unique features | Higher reverse mortgage amounts |
How does a Finance of America Reverse mortgage work?
You have several options with Finance of America Reverse mortgages, including a home equity conversion mortgage (HECM) and a proprietary reverse mortgage called HomeSafe.
Home Equity Conversion Mortgage (HECM)
A home equity conversion mortgage is a reverse mortgage that converts home equity into cash. It can come as a lump sum, in monthly payments, or in a line of credit.
Finance of America Reverse offers adjustable or fixed-rate HECMs, and you don’t need to repay the mortgage until the homeowner moves out or passes on. Reverse mortgage loan limits for 2024 on a HECM are $1,149,825.
HomeSafe
HomeSafe is Finance of America’s proprietary reverse mortgage for higher-balance loans up to $4 million. Its purpose is to provide reverse mortgages for borrowers whose homes wouldn’t fall under loan limits for FHA-insured HECMs.
The two main types of HomeSafe loans Finance of America Reverse issues are:
- HomeSafe Second. This type of mortgage leaves the first mortgage in place and issues a second. The second is like a reverse mortgage in that it provides additional cash from your equity and doesn’t have monthly payments. You don’t need to repay the HomeSafe second mortgage until you’re done living in the home.
- HomeSafe Standard. HomeSafe Standards is like a traditional reverse mortgage but has a larger limit. Finance of America can issue up to $4 million loans for borrowers who qualify.
Loan requirements
- Equity requirements: At least 50% equity (recommended)
- Loan-to-value: There’s no specified loan-to-value ratio on a reverse mortgage like there are with other types of mortgages.
- Principal loan limit: The principal loan amount is how much you can get for your home based on your age and interest rate. It works out to around 20% to 60% of the value of your home, which will include projected interest. The younger you are, the lower this number is. The number is also lower with higher interest rates. Lower interest rates and higher age (i.e., less time to withdraw money) grant access to larger amounts.
- Costs and fees: Costs are rolled into the reverse mortgage. Borrowers pay an origination fee, servicing fees, closing costs, and possibly a mortgage insurance premium. From a sample calculator, we found $17,000 in fees from the lender for a $500,000 home value with an 8.19% interest rate. This assumed the borrower didn’t have a current mortgage, and their starting age was 62. The fees don’t seem to change with a change in age, but they do with a higher loan limit.
Who’s eligible for a Finance of America Reverse mortgage?
The main requirement for a Finance of America Reverse mortgage is age. Borrowers must be at least 55, and 60 or 62 in many cases, depending on the state you live in.
The other requirements for a reverse mortgage relate to the property. A summary of the requirements is outlined in the table below:
| Requirement | Details |
| Age | Must be over 62* |
| Property type | Single-family homes, multi-family homes four units or fewer, condominiums, manufactured homes, or farms on agricultural land Not eligible: Mobile homes, multifamily properties over four units, and co-ops |
| Marital status | Ideally, both partners are listed as borrowers Eligible non-borrowing spouses must meet certain criteria to be able to stay in the home after the primary borrower leaves the home |
| Home upkeep requirements | Home must be kept in good condition |
| Distribution type | Lump sum, partial sum, line of credit, or monthly disbursement |
How do you repay a reverse mortgage from Finance of America Reverse?
Reverse mortgages are repaid all at once with no exceptions. This usually happens when the last surviving spouse moves out of the home or dies. You’ll get a repayment notice from Finance of America Reverse informing you the loan is due and payable.
It is common to sell the home to repay the mortgage. It’s also possible to refinance with another mortgage or pay off the reverse mortgage from savings.
If a borrower wants to pay back the mortgage early, no penalties apply if they make monthly payments or pay in full.
Pros and cons of a Finance of America Reverse mortgage
Before you apply for a Finance of America Reverse mortgage, consider the pros and cons.
Pros
-
Higher reverse mortgage limits
$4 million limit is much higher than FHA-insured loans.
-
Wide range of financing options
Traditional HECMs, second mortgage reverse mortgages, jumbo reverse mortgages, and more.
-
No monthly payments
Payments aren’t required until the end.
-
Flexible disbursement options
Money is available in a lump sum, as a credit line, or in monthly installments.
Cons
-
Interest rates are high
Rates on a reverse mortgage can be around a full percentage point higher than on a traditional mortgage.
-
Closing costs are sizable
You’ll pay a significant amount in closing costs, much like with a traditional mortgage.
-
You’ll lose equity
Because reverse mortgages don’t require a monthly payment, the loan balance will always rise and absorb the equity you’ve built in your home.
Reverse mortgages can help you stay in your home no other options are available, but they can be expensive. This isn’t unique to Finance of America Reverse. Other providers of reverse mortgages can also be expensive and difficult to work with.
Is Finance of America Reverse a reputable lender?
We compiled reviews from several sources to see what Finance of America Reverse customers think of the lender.
| Source | Customer rating | Number of reviews |
| Trustpilot | 4.2 out of 5 | 613 |
| 2.5 out of 5 | 32 | |
| Better Business Bureau (BBB) | 1.5 out of 5 | 8 |
Reviews for Finance of America Reverse vary. Many reviewers mention customer service issues with the company. Funding times also appear to be slow, but this seems to be the norm for reverse mortgage companies.
Reviews also report rising fees, but several customers said Finance of America Reverse offers the best rates and terms of any reverse mortgage lender.
Finance of America Reverse has an A+ accreditation with BBB, signifying its commitment to trustworthiness, customer satisfaction, and ethical business practices. We think it’s a reliable choice for reverse mortgage services.
How to apply for a Finance of America Reverse mortgage
You can’t apply for a reverse mortgage through Finance of America Reverse online. To reach Finance of America Reverse, you’ll fill out an online questionnaire the company will use to get in contact with you.
From there, the process looks like this:
- Complete loan counseling. This includes reviewing extensive information about reverse mortgages, eligibility, affordability, taxes and insurance, alternatives, payoff, heirs, and how to compare loans.
- Complete application. Finance of America Reverse can help with document preparation and offer advice on interest rates and fund disbursement.
- Meet with an appraiser. An appraiser will determine the value of your home.
- Underwriter review: Loan application goes back to the lender’s underwriter, and if it meets the lender’s requirements, the underwriter will approve you.
- Sign for the loan. Review the contract before you sign.
- Get funds. You can choose a lump sum, monthly payments, or a line of credit.
If you’re denied, find out why. You may be too young, you might not have enough equity in your home, your property may not qualify, or the lender could have determined you can’t meet the financial obligations to cover taxes, insurance, or maintenance of the property.
Once you know the reason, you can make changes to ensure approval next time, or explore your other options.
How do other home equity products compare to a Finance of America Reverse mortgage?
Consider whether a reverse mortgage is best for your situation or whether another home equity product—such as a home equity line of credit (HELOC), home equity loan, or a cash-out refinance—makes more sense.
| Rev. mort. | HELOC | HE loan | Cash-out refi | |
| Flexible funds? | ||||
| Lump sum? | * | |||
| Mo. pmts.? | ||||
| Age req’t.? | ||||
| Closing costs | High | Low | Low | Med. |
Reverse mortgage
Reverse mortgages are expensive, but they allow you to keep your home and avoid foreclosure.
Best for: Homeowners with no other options; No monthly payments
Home equity line of credit (HELOC) or home equity loan
A HELOC is similar to a credit card: You can access your credit line as needed and can often make minimal interest-only periods for several years while having access to funds. Once this draw period ends, you begin making full principal-and-interest payments.
Best for: Flexible access to money; Borrowers who can make the monthly payments
A home equity loan is a more traditional term loan. Funds are distributed upfront instead of as needed.
Best for: A large planned expense; Borrowers who can qualify for the loan.
Cash-out refinance
A cash-out refinance is when you take out a new, larger first mortgage and withdraw your home’s equity in cash.
Best for: Borrowers who need a lump sum; One monthly payment
Finance of America Reverse mortgage FAQ
How long does it take to receive funds from Finance of America Reverse?
Upon completing the application process for a reverse mortgage with Finance of America Reverse, it can take 30 to 45 days to get funds. This timeline is subject to change and can vary based on individual circumstances and the complexity of the loan. Cooperation in providing the necessary documentation can expedite this process.
Are there any insurance requirements?
Yes, Finance of America Reverse has insurance requirements. It stipulates that all borrowers must maintain adequate homeowners insurance. This protective measure safeguards the property, which serves as the collateral for the loan. Borrowers of FHA-insured HECMs must pay mandatory mortgage insurance premiums.
Can you back out of a reverse mortgage contract?
You have the right to back out of a reverse mortgage contract after signing. Federal law protects this cooling-off period, also known as the right to rescind.
It allows potential borrowers three business days following loan closing to cancel the commitment without penalty. For the request to be effective, you must submit it in writing. It’s critical to ensure a reverse mortgage fits your financial needs before signing any contracts.
The post Finance of America Reverse Mortgage Review appeared first on LendEDU.