The HomeSafe® for Purchase is a retirement financing product ideal for borrowers who are looking to relocate or right-size to a new home. It allows borrowers to increase their buying power when purchasing their ideal retirement home while eliminating their monthly mortgage payments.
As Finance of America Reverse LLC (FAR) continues to innovate in the proprietary reverse mortgage market, it becomes increasingly essential to meet the needs of our customers with various rates and pricing solutions. As a result, FAR introduced a premier suite of financial tools, called HomeSafe®, that empower our customers with personalized plans to meet their retirement financing needs.
The HomeSafe® suite includes the HomeSafe® Select, HomeSafe® Standard, HomeSafe® Flex, for Purchase, and HomeSafe® Second. This article will provide a deep dive into the scenario where the HomeSafe® for Purchase product maximizes the borrower’s benefits.
HomeSafe® for Purchase Solution
Before 2008, many retired homeowners wishing to relocate had to purchase their new home using traditional financing, season their residency in the house, and then refinance with a reverse mortgage later.
Now, a HomeSafe for Purchase may be used to purchase a primary residence without having to waste the cashflow associated with traditional financing. This pathway allows homebuyers age 62+ to buy a home and obtain a reverse mortgage in a single transaction. The HomeSafe for Purchase can eliminate costs, hassle, and time, making it easier for retired homeowners to relocate. It also increases the buyer’s purchasing power by allowing the lender to finance a portion of the sales price. HomeSafe for Purchase helps homeowners with three broader goals:
- Many want to RELOCATE to be closer to family members
- Many need to DOWNSIZE to homes to match their needs
- Many wish to UPSIZE to their dream home for retirement
The principal amounts that the lender can offer are the same as with traditional reverse mortgages. The primary difference is that the client has no existing equity in the new home, and will, therefore, need to bring the remaining funds to closing. But now they can relocate and have no monthly principal and interest mortgage repayment obligations.
Ideal Borrower Scenario
To help illustrate how the HomeSafe for Purchase can be used, here is an example scenario where the HomeSafe® for Purchase maximizes the borrower’s benefits:
Mrs. Baker is 72 years old, and her kids and grandchildren recently moved away. Now left with no family in the area to realize the home where she raised her children no longer meets her current needs.
She wants to move to be closer to the family but worries about tying up her retirement assets.
- Sold home value: $1,200,000
- Mortgage balance: $0
- Net proceeds: $1,104,000
- New Home Desired: $950,000
- Available HomeSafe Standard proceeds: $434,558.50*
- Equity Contribution from borrowers’ funds: $517,184
- Liquidity increase: $1104,000 – $517,184= $ 586,816
*This example scenario ration assumes 6.750% interest rate, $5613.95 Lender Credit and closing costs of $7,356.45
HomeSafe® for Purchase Benefits
In this scenario, the HomeSafe for Purchase solution helped Mrs. Baker achieve her retirement goals of “right-sizing” her home to an ideal place without incurring any monthly mortgage payments. She was able to relocate to be closer to her family, and she increased her retirement portfolio liquidity with savings from the home she moved from. This example shows how the HomeSafe® for Purchase product can help your clients achieve their retirement goals.
FAR follows the same Financial Assessment qualifications as the FHA HECM product. The HomeSafe is a non-recourse loan, and the borrower or their heirs have no personal liability for repayment of the loan. They can never owe more than the loan amount or appraised value, whichever is lower. There are no prepayment penalties; however, on the fixed-rate HomeSafe®, a borrower cannot redraw prepaid funds.
Reverse mortgages, with their built-in consumer safeguards and flexible options for accessing equity, are transforming the way people approach retirement. With any financial decision, it is essential to consider your options carefully. The right financial advisor can guide your clients toward a great decision that works with their financial goals.
* It should be noted that this example is for educational purposes only. With any reverse mortgage, the borrower must meet all loan obligations, including living on the property a principal residence and paying property charges, including property taxes, fees, and hazard insurance. Also, the borrower must maintain the home. If the homeowner does not meet these loan obligations, the loan will need to be repaid.
Oregon Only:When the loan is due and payable, some or all of the equity in the property that is the subject of the reverse mortgage no longer belongs to borrowers, who may need to sell the home or otherwise repay the loan with interest from other proceeds. FAR may charge an origination fee, mortgage insurance premium, closing costs and servicing fees (added to the balance of the loan).·The balance of the loan grows over time and FAR charges interest on the balance.· Borrowers are responsible for paying property taxes, homeowner’s insurance, maintenance, and related taxes (which may be substantial). We do not establish an escrow account for disbursements of these payments. A set-aside account can be set up to pay taxes and insurance and may be required in some cases. Borrowers must occupy home as their primary residence and pay for ongoing maintenance; otherwise the loan becomes due and payable. The loan also becomes due and payable (and the property may be subject to a tax lien, other encumbrance, or foreclosure) when the last borrower, or eligible non-borrowing surviving spouse, dies, sells the home, permanently moves out, defaults on taxes, insurance payments, or maintenance, or does not otherwise comply with the loan terms. Interest is not tax-deductible until the loan is partially or fully repaid.
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