The HomeSafe® for Purchase is 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 important to meet the needs of our customers with various rate 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 include the HomeSafe® Select, HomeSafe® Standard, and HomeSafe for Purchase. 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
Prior to 2008, many retired homeowners wishing to relocate had to purchase their new home using traditional financing, season their residency in the home, 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 60+ to purchase 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 want to UPSIZE to their dream home for retirement
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 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 by $586,816 with savings from the sale of the home she moved out of. This is a perfect example of how the HomeSafe for Purchase product can help people 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 and 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 important to carefully consider your options. The right financial advisor can guide you to a great decision that works with your financial goals.
*For certain HomeSafe® products only, excluding Texas and Utah where the minimum age is 62.