A Second Lien Reverse Mortgage That Puts You First!
Many homeowners explore reverse mortgage solutions as a way to access a portion of their home equity during retirement. These funds may be used to support cash flow, manage expenses, or provide additional financial flexibility—without selling the home.
Traditional reverse mortgage loans generally require the existing mortgage to be paid off as part of the transaction. For homeowners who currently have a low interest rate on their existing mortgage, refinancing may not be an attractive option. In these situations, a second-lien reverse mortgage may be worth exploring. That’s where HomeSafe Second can help!
What Is HomeSafe Second?
HomeSafe Second is a second-lien reverse mortgage that sits behind an existing mortgage or Home Equity Line of Credit (HELOC). This structure allows eligible homeowners to access a portion of their home equity without refinancing their current mortgage.
As the loan is structured as a reverse mortgage, no additional monthly mortgage payment is typically required for the HomeSafe Second loan itself. Borrowers must still remain current on property taxes, homeowners insurance, and any existing mortgage payments tied to the first lien.
For some homeowners, this may serve as an alternative to traditional home equity loans or HELOCs while allowing them to keep the terms of their current mortgage.
Benefits of HomeSafe Second
1. Access Your Home Equity Without Refinancing
HomeSafe Second allows eligible homeowners to unlock a portion of their home equity while keeping their existing mortgage in place. Loan proceeds are typically provided as a lump sum and do not require refinancing the primary mortgage.*
*Borrower must live in the home, maintain it, and pay critical property charges like taxes and insurance.
2. Flexible Repayment Options
Although interest and fees accrue on the loan balance, borrowers are generally not required to make monthly payments toward the HomeSafe Second loan as long as they meet the loan obligations. These obligations typically include living in the home as a primary residence and remaining current on property taxes, insurance, and any existing mortgage payments.
3. Non-Recourse Protection
When the loan becomes due (usually when the borrower moves out of the home or passes away) the home is commonly sold to repay the outstanding balance. If the sale price is less than the remaining loan balance, neither the borrower nor their heirs are responsible for the shortfall. If the home sells for more than the remaining balance, any excess proceeds belong to the borrower or their heirs.
However, if the home sells for more than the remaining loan balance, the borrower or their heirs pocket the difference!
Alternatively, heirs can keep the home by paying off or refinancing the remaining liens.
Common Ways People Utilize HomeSafe Second
- Consolidate high-interest debt
- Manage everyday expenses
- Cover medical and long-term care (LTC) needs
- Upgrade your home for comfort and safety
- Enhance your lifestyle
General Eligibility Requirements
The borrower(s) must:
- Be 55+ (60+ in WA, 62+ in TX)
- Own a home in an eligible state (AZ, CA, CO, CT, FL, IL, MT, NV, OR, SC, TX, UT, WA)
- Meet minimum credit and income requirements
- Have an existing first mortgage in good standing
- Attend a HUD-approved financial counseling session to help you determine if the loan is a good fit
Eligible Property Types
NOTE: Manufactured homes and modular properties do not qualify.
- Single-family homes
- Planned unit developments (PUDs)
- Condos and townhomes
- 2- to 4-unit properties
How does HomeSafe Second compare to a HELOC?
| Feature | HomeSafe Second | HELOC |
|---|---|---|
| Interest Rate Type | Fixed | Variable |
| Loan Type | Lump sum | Line of credit |
| Minimum Credit Score | 600-719 (subject to full financial assessment) 720+ (Simplified financial assessment) |
680 |
| Monthly Payments Required | No. But you can make a payment at any time without penalty to preserve equity. | Yes. Interest only for 10 years, then fully amortizing over 20 years. |
| Minimum Age | Yes. 55 for AZ, CA, CO, CT, FL, MT, NV, OR, SC, UT, IL. 60 for WA. 62 for TX. | No |
| Borrower Still Owns Home | Yes | Yes |
| Availability | AZ, CA, CO, CT, FL, MT, NV, OR, SC, TX, UT, WA, IL | All states |
| Repayment Options | Due when the borrower moves, leaves the property, fails to pay taxes or insurance, or violates the terms of the loan. | 30 years. Interest only for 10 years, then fully amortizing over 20 years. |
HomeSafe Second Frequently Asked Questions
How does HomeSafe Second work?
Typically, the process has five key steps:
- The homeowner must have an existing first mortgage that is current and in good standing
- Speak with a Fairway specialist to review eligibility and determine whether a second-lien reverse mortgage may be appropriate.
- Complete required third-party counseling and obtain a home appraisal as part of the application process
- If approved, loan proceeds are typically distributed as a lump sum and may be used for a variety of purposes
- Repayment of the loan balance is usually deferred as long as the borrower continues living in the home and meets loan obligations such as paying property taxes and homeowners insurance
What are the pros and cons of HomeSafe Second?
Pros
- No required monthly payments on the HomeSafe Second loan as long as the borrower continues to live in the home and meets loan obligations, including paying property-related charges
- Loan proceeds are generally not considered taxable income**
- The borrower retains the title so long as they meet the loan obligations
- In many cases, Social Security or Medicare benefits are not affected**
Cons
- Unpaid loan balance grows over time with interest
- Accessing home equity could impact eligibility for certain needs-based assistance programs**
- Upfront costs may be higher than those associated with some traditional home equity products such as HELOCs or home equity loans
- The program requires a qualifying first mortgage to already be in place
**This does not constitute tax or financial advice from Fairway. Please consult a tax professional or financial advisor regarding your specific situation.
How is a HomeSafe Second loan repaid?
When the loan becomes due, it is typically repaid through the sale of the home. If the property sells for less than the outstanding loan balance, the borrower or their heirs are generally not responsible for paying the remaining difference due to the non-recourse feature. If the home sells for more than the balance owed, any remaining proceeds belong to the borrower or their heirs. Heirs may also choose to keep the home by paying off or refinancing the outstanding liens.
When does HomeSafe Second become due?
Repayment is deferred until the last remaining borrower passes away or permanently leaves the home. The loan may also become due earlier if the borrower does not meet required loan obligations, such as maintaining the property or staying current on property taxes and homeowners insurance.
Are there any first mortgage types that are not eligible?
Certain first lien types are ineligible for HomeSafe Second, such as:
- Interest-only loans
- Loans with a balloon payment at maturity
- Negatively amortizing loans
- Private lender loans
- Rehabilitation loans that are still in the construction or draw phase
- Texas 50(a)(6) loans
- Existing reverse mortgages, including HECM loans
Let’s start a conversation
If you are interested in a HomeSafe Second loan or want more information, contact us today.
Our experienced team will help you understand HomeSafe Second so you can make an informed decision about whether it’s the right financial solution for you.
The HomeSafe reverse mortgage is a proprietary product of Finance of America Reverse LLC and is not affiliated with the Home Equity Conversion Mortgage (HECM) program.