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Finance of America Reverse LLC launched EquityAvail, a new mortgage product designed to increase financial flexibility for homeowners at or near retirement. The product fuses elements of a forward mortgage with a reverse mortgage in hopes to improve cash flow and help retirees accomplish their retirement goals, according to a press release.
The hybrid product will allow qualifying homeowners to refinance a traditional mortgage and reduce the required monthly payment for 10 years. Once the period is over, the borrower is no longer required to make monthly payments. The company notes that taxes and insurance must always be paid, however, completely removing a monthly mortgage payment will give homeowners more financial stability in the case of an unexpected expense.
Finance of America Reverse reported that over the last three decades, the number of people over the age of 60 burdened by traditional mortgage debt has doubled to more than 40%. The company also revealed that homeowners will look to mortgage refinances to help lower their monthly payments. However, this could end up being costly for borrowers over the age of 60 with an additional 30 more years of mortgage payments. Finance of America Reverse also pointed out that many retirees whose incomes are decreasing will not qualify for a traditional refinance due to high debt-to-income ratios.
“Every year, more than a million homeowners over the age of 60 enter into a 30-year mortgage obligation, yet current qualification standards only require lenders to ensure borrowers can afford mortgage payments for about three years. After that, they’re on their own. Then, there are another million or so individuals of the same age who are denied a 30-year mortgage altogether due to insufficient cash flow. The result is more than two million homeowners who, if given the opportunity, would have likely explored a more suitable loan alternative at this stage in life. Our commitment to helping these people is what led FAR to create a solution from the ground up that can unlock a whole new world of options,” said Kristen Sieffert, president of FAR.
EquityAvail is a single, fixed-rate mortgage, according to the press release. The loan is fully disbursed at closing with a maximum loan amount of up to $4 million. Like traditional forward mortgages, a tax and insurance escrow account is used for ease of budgeting and administration. When the homeowner dies, sells the house, or it ceases to serve as their primary residence, the remaining loan balance is paid back. Importantly, the homeowner or heirs will never owe more than the value of the home, as it is a non-recourse loan. Additionally, EquityAvail has no origination fees or monthly servicing fees, and there is no minimum home value required to qualify.
“EquityAvail is the latest example of our proven ability to innovate and create products that meet the evolving needs of our customers. It is the proprietary insights gleaned from our powerful data platform that enable us to identify gaps in the market, providing us with a sustainable competitive advantage. In this case, we noticed a need that wasn’t being met by either a traditional or reverse mortgage product and leveraged our decades of expertise within both sectors to create a solution that will make a real difference,” said Patti Cook, CEO of Finance of America.