If you’re 62 or older and sitting on a paid-off or nearly paid-off home, you might have more retirement funding options than you realize. A reverse mortgage lets you convert part of your home equity into cash without selling or making monthly loan payments. And when it comes to reverse mortgage lenders, Finance of America Reverse (FAR) is one of the biggest names in the business.
But what exactly does FAR offer, how does it compare to other options, and is it the right fit for your situation? Here’s a breakdown of what you need to know.
What Is a Reverse Mortgage, Anyway?
A reverse mortgage is a loan available to homeowners 62 and older that allows them to borrow against their home equity. Unlike a traditional mortgage, you don’t make monthly payments. Instead, the loan balance grows over time and is repaid when you sell the home, move out permanently, or pass away.
Most reverse mortgages are Home Equity Conversion Mortgages (HECMs), which are insured by the Federal Housing Administration (FHA). There are also proprietary reverse mortgages—sometimes called jumbo reverse mortgages—offered by private lenders. These can be attractive if your home is worth more than the HECM lending limit, which for 2024 is $1,149,825.
Finance of America Reverse: Who They Are
Finance of America Reverse is a subsidiary of Finance of America Companies, a diversified financial services firm. FAR was originally founded as Urban Financial Group and was acquired by Finance of America in 2013. Today, it’s one of the largest reverse mortgage lenders in the U.S., licensed in all 50 states.
FAR specializes in reverse mortgages, offering both the standard HECM and a suite of proprietary products under the “HomeSafe” name. They also have a wholesale division that works with brokers. If you’re looking for a forward mortgage instead, Finance of America’s other division handles traditional loans—our Finance of America Mortgage review covers that side of the business.
How a Reverse Mortgage Through FAR Works
The process starts with an eligibility check. To qualify for a HECM through FAR, you need to be at least 62, own your home outright or have a significant amount of equity, and use the home as your primary residence. You’ll also need to meet with a HUD-approved counselor to discuss the implications. This counseling session is required for all HECM loans and is designed to make sure you understand the costs and obligations.
Once you’re approved, you can choose how to receive your funds:
- Lump sum: Take all available funds at once (only available with a fixed-rate HECM).
- Line of credit: Draw money as needed, with the unused portion growing over time.
- Monthly payments: Receive regular payments for a set period or for as long as you live in the home.
- Combination: Mix and match the above options.
You’ll also choose between a fixed interest rate or an adjustable rate. Fixed rates are typically only for lump-sum distributions, while adjustable rates give you more flexibility in how you take the money. Keep in mind that with a reverse mortgage, you still own your home and are responsible for property taxes, homeowners insurance, and maintenance. If you fail to keep up with these expenses, the loan can become due.
Types of Reverse Mortgages from Finance of America Reverse
FAR offers a range of products designed to fit different needs and home values.
HECM (Home Equity Conversion Mortgage)
The standard FHA-insured reverse mortgage. It comes with a 2% upfront mortgage insurance premium and an annual 0.5% premium. The amount you can borrow depends on your age, current interest rates, and the appraised value of your home, up to the HECM limit.
HomeSafe Standard
A proprietary jumbo reverse mortgage that lets you access more equity if your home is worth more than the HECM limit. There’s no mortgage insurance premium, but interest rates are often higher than on a HECM. You can choose a fixed or adjustable rate, and funds can be taken as a lump sum or line of credit.
HomeSafe Flex
Another proprietary option that offers a line of credit with a growth feature. It’s designed for homeowners who want flexibility and don’t mind a slightly higher rate in exchange for no upfront mortgage insurance costs.
Costs and Fees to Expect
Reverse mortgages aren’t free. Finance of America Reverse charges similar fees to other lenders, and some can be rolled into the loan balance so you don’t pay out of pocket.
- Origination fee: For HECMs, this is capped at $6,000 (2% of the first $200,000 plus 1% of the remainder). Proprietary loans may have different fee structures.
- Mortgage insurance premium: 2% upfront and 0.5% annually for HECMs.
- Closing costs: Appraisal, title search, credit report, and other third-party fees.
- Servicing fee: Monthly fee, often around $30–$35.
- Interest: Accrues on the outstanding balance over time.
These costs can add up, so it’s crucial to compare offers from multiple lenders. Even a small difference in interest rate or fees can mean thousands of dollars over the life of the loan.
Who Is a Good Candidate for a Reverse Mortgage?
Not everyone should rush into a reverse mortgage. It can be a lifeline for some and a costly mistake for others. Here’s a quick way to gauge if you might be a good fit:
- You’re 62 or older and own your home outright or have substantial equity.
- You plan to stay in your home for the long haul.
- You can comfortably cover property taxes, homeowners insurance, and maintenance costs.
- You need extra cash flow to supplement retirement income or cover unexpected expenses.
- You’re comfortable with the idea that the loan will reduce the inheritance you leave to your heirs.
On the other hand, a reverse mortgage may not be ideal if you plan to move within a few years, have little equity, or would struggle to keep up with ongoing homeownership costs.
Alternatives to a Reverse Mortgage
If a reverse mortgage doesn’t sound right—or if you’re not yet 62—there are other ways to tap your home equity or finance a home. A home equity loan or HELOC lets you borrow against your equity while making monthly payments. Downsizing to a smaller home can free up cash and reduce expenses.
For those who prefer a traditional mortgage, whether to buy a new home or refinance, working with a forward lender might make more sense. Our guide on how to choose the right mortgage can help you navigate today’s market. Lenders like Fairway Independent Mortgage and Freedom Mortgage offer a variety of loan programs for buyers and refinancers.
Questions to Ask Before You Sign
Before committing to a reverse mortgage with Finance of America Reverse or any other lender, get clear answers to these questions:
- What are the total closing costs and fees, and which ones can be financed?
- How will the loan affect my heirs and my estate?
- What are the repayment terms, and what triggers the loan becoming due?
- Can I get a better interest rate or lower fees from another lender?
- What happens if I outlive the loan or need to move into assisted living?
- Are there any restrictions on how I use the funds?
Taking the time to understand the fine print can save you from costly surprises down the road. A reverse mortgage is a powerful tool, but it’s not one-size-fits-all. Weigh your options carefully, and don’t hesitate to seek independent advice from a financial advisor or housing counselor.