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SECOND-LIEN REVERSE MORTGAGE
Access Home Equity Without Replacing Your Existing Mortgage
If you have a mortgage with terms you would like to keep, a second-lien reverse mortgage may provide another way to access a portion of your housing wealth.
Unlike a traditional reverse mortgage that generally pays off an existing mortgage, a second-lien reverse mortgage may allow an eligible first mortgage to remain in place.
This can provide access to home equity without refinancing your current first mortgage.
What Is a Second-Lien Reverse Mortgage?
A Different Way to Access Your Housing Wealth
A second-lien reverse mortgage is a proprietary reverse mortgage designed to provide eligible homeowners access to a portion of their home equity while allowing an existing first mortgage to remain in place.
The reverse mortgage is placed in the second-lien position behind the existing mortgage.
This may be worth considering when your current mortgage has an interest rate or other terms you would prefer to keep.
How Does a Second-Lien Reverse Mortgage Work?
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Your eligible first mortgage remains in place, including its existing loan terms and required monthly payments.
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The second-lien reverse mortgage is placed behind it and provides access to a portion of the available equity in your home.
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You continue making the required payments on your existing first mortgage, while the second-lien reverse mortgage generally does not require a monthly principal and interest payment as long as the loan requirements are met.
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Interest and applicable loan costs are added to the reverse mortgage balance over time*.
*Borrower must live in the home, maintain it, and pay critical property charges like taxes and insurance.
General Requirements:
Eligibility depends on several factors, including your age, property, available equity, existing mortgage, and current program guidelines.
Considerations may include:
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Meeting the minimum age requirement
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Having sufficient equity in the property
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Having an eligible existing first mortgage
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Meeting applicable financial assessment requirements
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Owning an eligible property
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Maintaining the home as your primary residence
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Remaining current on your existing mortgage and required property charges
Because proprietary reverse mortgage programs and guidelines can change, your individual circumstances should be reviewed to determine which options may currently be available.
Second-Lien Reverse Mortgage vs. a HELOC
Both Access Home Equity—but They Work Differently
A HELOC and a second-lien reverse mortgage can both provide access to home equity, but their structure and repayment requirements are different.
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A HELOC typically provides a revolving line of credit, generally requires monthly payments, and may have a variable interest rate.
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A second-lien reverse mortgage allows an eligible existing first mortgage to remain in place while generally eliminating the requirement for monthly principal and interest payments on the second-lien reverse mortgage itself.
One option isn't automatically better than the other. Your existing mortgage, income, available equity, borrowing needs, time horizon, and retirement goals should all be considered when comparing your options.
How does HomeSafe Second compare to a HELOC?
**This does not constitute tax or financial advice from Fairway. Please consult a tax professional or financial advisor regarding your specific situation.
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.
What Happens to the Loan Over Time?
Because monthly principal and interest payments are generally not required on the second-lien reverse mortgage, interest and applicable loan costs are added to the loan balance over time. As the balance increases, the amount of equity remaining in the home may decrease.
The loan generally becomes due when a maturity event occurs, such as when the home is sold or is no longer the borrower's primary residence. The specific terms and protections depend on the proprietary reverse mortgage program selected.
Is a Second-Lien Reverse Mortgage Right for You?
A second-lien reverse mortgage can provide valuable flexibility, but it isn't the right solution for every homeowner.
A Housing Wealth Review can help you look at your existing mortgage, available equity, cash-flow needs, and retirement goals to determine whether keeping your current mortgage and adding a second-lien reverse mortgage—or considering another strategy—is worth exploring.
Start With a Housing Wealth Review
Before discussing a particular mortgage product, I like to start with something much simpler:
What do you want your home and housing wealth to help you accomplish in retirement?
From there, we can explore the available options, compare the tradeoffs, and determine what—if anything—makes sense for you.