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HomeSafe Second vs HELOC: What is the difference?
In this article:
- What is HomeSafe Second?
- What is a home equity line of credit (HELOC)?
- HomeSafe Second vs. HELOC: What’s the difference?
- HomeSafe Second vs. HELOC eligibility
- HomeSafe Second vs. HELOC: How to decide which may be right for you
- Still deciding between HomeSafe Second and a HELOC?
- FAQs about HomeSafe Second vs. HELOC
Quick answer: Both HomeSafe Second and a home equity line of credit (HELOC) may allow borrowers to access home equity without refinancing their existing mortgages. However, the loans differ in important ways, including monthly payment requirements, interest rates, access to funds, eligibility, and repayment.
Key Points
HomeSafe Second is a proprietary second-lien reverse mortgage with a minimum borrower age of 55 in many states that does not require monthly mortgage payments.1
A HELOC is a revolving line of credit that allows homeowners to borrow against their home equity as needed and typically requires a monthly payment.
The better fit depends in part on whether you prefer a fixed interest rate without a new monthly mortgage payment or the flexibility to borrow and repay funds over time.
When you think of a reverse mortgage, you may picture a loan that pays off and replaces your existing mortgage. But not all reverse mortgages work that way.
HomeSafe Second is a second-lien reverse mortgage that sits behind your first mortgage, allowing you to keep that loan—and its existing terms—in place.
A HELOC may also allow you to access home equity while keeping your existing mortgage. But despite that similarity, the two options work quite differently.
This guide spells out the distinctions between these two loan options and explains what to consider when deciding which may better meet your needs. For a broader look at your choices, see how reverse mortgages, HELOCs, and home equity loans compare.
Finance of America does not currently offer home equity loans or HELOCs.
What is HomeSafe Second?
HomeSafe Second is Finance of America’s proprietary second-lien reverse mortgage. It sits behind your existing first mortgage rather than replacing it.
That means eligible borrowers keep their current mortgage—and its existing terms—while accessing a portion of their home equity through a second lien.
HomeSafe Second carries a fixed interest rate and requires no monthly mortgage payments, provided you meet loan obligations. However, interest accrues and is added to the loan balance over time. You generally don’t have to repay HomeSafe Second until you sell the home, permanently move out, or the last borrower dies.
Borrowers may receive proceeds as one lump sum or through a non-revolving line of credit. With the line-of-credit option, borrowers can take multiple draws from their available funds, but repaid money does not become available for borrowing again. The line-of-credit option is currently offered only in California.
→ Learn more: What is a HomeSafe Second mortgage?
The HomeSafe Second reverse mortgage is a proprietary product of Finance of America and is not related to the Home Equity Conversion Mortgage (HECM) program. HomeSafe Second is only available in certain states. Please contact us for a complete list of availability. Terms and conditions on the first lien loan apply. Must meet combined loan value requirements based on a satisfactory appraisal.
The borrower must meet all loan obligations, including living in the property as the principal residence and paying property charges, including property taxes, fees, and hazard insurance. The borrower must maintain the home. If the homeowner does not meet these loan obligations, then the loan will need to be repaid.
What is a home equity line of credit (HELOC)?
A HELOC is a revolving line of credit secured by your home. Instead of receiving the full amount you are eligible for upfront, you may borrow from the line as needed, up to your approved credit limit, during a set draw period.
Because the line is revolving, money you repay during this time generally becomes available to borrow again, subject to the lender’s terms. Interest is typically charged only on the amount you borrow, not on the entire credit limit.
HELOCs usually have variable interest rates and require monthly payments. During the draw period, which usually lasts five to 10 years, monthly payments may be interest-only. Once the draw period ends, the HELOC generally enters a repayment period. At that point, you can no longer draw funds, and payments include both principal and interest.
→ Read more: Is a HELOC a good idea?
HomeSafe Second vs. HELOC: What’s the difference?
The most important differences between HomeSafe Second and HELOCs come down to how the loans work and how they affect your finances. Here’s a side-by-side look at how the two options compare.
| Feature | HomeSafe Second | HELOC |
| Loan type | Proprietary second-lien reverse mortgage | Revolving line of credit secured by the home |
| Minimum age | May be available to borrowers as young as 55, depending on location | No age requirement |
| Monthly payments | No required monthly mortgage payments on the second lien as long as loan obligations are met* | Monthly payments required |
| Interest rate | Fixed | Typically variable |
| Access to proceeds | Lump sum or, where available, non-revolving line of credit | Revolving access during the draw period |
| Credit/income requirements | Subject to HomeSafe Second’s financial and underwriting requirements | Generally based on factors including credit, income, and debt-to-income ratio |
| First mortgage | Remains in place; existing first lien must meet HomeSafe Second requirements | Remains in place |
| Loan amount | Based on product requirements, borrower eligibility, and available equity | Varies by lender, borrower eligibility, and available equity |
| Closing costs | Costs vary by option; origination fees and other closing costs apply | Varies by lender |
| Repayment | Generally deferred until a maturity event | Follows contractual draw and repayment periods |
| Non-recourse protection1 | Yes | Generally no |
| Residence requirements | Must be the borrower’s principal residence | Requirements vary by lender |
*The borrower must meet all loan obligations, including living in the property as the principal residence and paying property charges, including property taxes, fees, and hazard insurance. The borrower must maintain the home. If the homeowner does not meet these loan obligations, then the loan will need to be repaid.
One important difference is non-recourse protection.1 With HomeSafe Second, this generally means that if the loan balance exceeds the home’s value when the home is sold to repay the loan, the borrower or estate is not responsible for paying the difference. A HELOC does not provide this safeguard.
Upfront expenses also differ. HomeSafe Second has an origination fee of up to $3,995, or up to $4,995 for the line-of-credit option available in California. An appraisal costs approximately $800, although the actual cost varies by state and property, and HUD-approved counseling generally costs approximately $150–$200. Other closing costs generally range from $1,500 to $4,000. HELOC fees vary by lender.
Other differences, including monthly payment requirements, access to funds, interest rates, and repayment, are worth a closer look.
Monthly payments and cash flow
HomeSafe Second does not require monthly mortgage payments on the second lien as long as you meet the loan obligations. That may be important if you are approaching or already in retirement and want to avoid adding another monthly obligation that could affect your retirement cash flow.
A HELOC adds a monthly payment obligation. The amount may change based on how much you borrow, whether you are in the draw or repayment period, and changes in the interest rate.
The borrower must meet all loan obligations, including living in the property as the principal residence and paying property charges, including property taxes, fees, and hazard insurance. The borrower must maintain the home. If the homeowner does not meet these loan obligations, then the loan will need to be repaid.
Lump sum vs. line of credit
HomeSafe Second may provide proceeds as a lump sum or, with the non-revolving line-of-credit option, through multiple draws over time. Unlike a revolving line of credit, however, repaid amounts are not available for borrowing again.
A HELOC is revolving. During the draw period, you can generally borrow, repay, and borrow again up to your available credit limit, subject to the loan terms.
Fixed vs. variable interest rates
HomeSafe Second has a fixed interest rate, so it does not change over time. Interest continues to accrue, increasing the loan balance.
HELOCs typically have variable rates, so borrowing costs can rise or fall over time, potentially affecting both the interest you pay and your monthly payment.
Repayment timing
With HomeSafe Second, the loan generally becomes due when you sell the home, permanently move out, or the last borrower dies. It may also become due if you fail to meet loan obligations, such as paying property taxes and homeowners insurance, maintaining the home, or meeting the obligations of your first mortgage.
A HELOC has two phases: a draw period and a repayment period. During the draw period, you can borrow from the line of credit, and your required monthly payments may be interest-only. Once the draw period ends, you can no longer borrow from the line and typically begin repaying both principal and interest over a set period.
If you sell your home with either loan, you generally must repay the outstanding balance because the property secures both loans.
The HomeSafe Second reverse mortgage is a proprietary product of Finance of America and is not related to the Home Equity Conversion Mortgage (HECM) program. HomeSafe Second is only available in certain states. Please contact us for a complete list of availability. Terms and conditions on the first lien loan apply. Must meet combined loan value requirements based on a satisfactory appraisal.
HomeSafe Second vs. HELOC eligibility
Eligibility is another area where the two options differ.
HomeSafe Second eligibility depends on factors such as your age, financial situation, and sufficient equity in your primary residence, with minimum age requirements varying by state. Your existing first lien must also meet product requirements. It may be a fully amortizing fixed-rate mortgage, a fully amortizing adjustable-rate mortgage (ARM), or a HELOC that has entered its repayment period. HomeSafe Second is not available in all states.
A HELOC does not have a minimum age requirement. Lenders instead generally evaluate factors such as the borrower’s credit history and score, income, debt-to-income ratio, home value, and available equity. Property and residency requirements vary by lender.
Please note: Product guidelines, eligibility requirements, fees, and other terms are subject to change.
The HomeSafe Second reverse mortgage is a proprietary product of Finance of America and is not related to the Home Equity Conversion Mortgage (HECM) program. HomeSafe Second is only available in certain states. Please contact us for a complete list of availability. Terms and conditions on the first lien loan apply. Must meet combined loan value requirements based on a satisfactory appraisal.
HomeSafe Second vs. HELOC: How to decide which may be right for you
The choice between HomeSafe Second and a HELOC isn’t just about how much equity you may be able to access. It also affects how and when funds are available to you, when payments are required, and how your loan balance changes over time. As you compare the two, consider the following questions.
Can you afford another monthly payment?
Another required monthly payment can affect your budget and retirement cash flow. A HELOC requires monthly payments, while HomeSafe Second does not require monthly mortgage payments on the second lien as long as you meet the loan obligations. With HomeSafe Second, however, unpaid interest accrues on the loan balance over time.
The borrower must meet all loan obligations, including living in the property as the principal residence and paying property charges, including property taxes, fees, and hazard insurance. The borrower must maintain the home. If the homeowner does not meet these loan obligations, then the loan will need to be repaid.
How and when do you need the funds?
How much you need, when you need it, and what you plan to use it for can help determine which option better fits your needs. HomeSafe Second offers proceeds as a lump sum or, in California, through a non-revolving line of credit. A lump sum may make sense for a large planned expense, such as home improvements. With the HomeSafe Second line of credit, you can take draws over time, but repaid amounts do not become available to borrow again. By contrast, a HELOC allows you to borrow, repay, and borrow again during the draw period.
Do you prefer a fixed or variable interest rate?
If knowing your interest rate will not change is important to you, HomeSafe Second may be appealing. With a variable-rate HELOC, consider how a rate change could make your monthly payments increase and affect your overall borrowing costs.
How long do you plan to stay in your home?
How soon you expect to move or sell can affect how you compare the two options. HomeSafe Second generally becomes due when you sell the home, permanently move out, or the last borrower dies. A HELOC follows the repayment schedule in the loan agreement, but generally must also be repaid if you sell the home. If you expect to move soon, factor in the upfront costs of either option and when the outstanding balance will need to be repaid.
How important is preserving home equity?
Both options can reduce the equity you retain in your home, but in different ways. With HomeSafe Second, the loan balance grows over time as unpaid interest accrues, which can reduce your remaining home equity. Although monthly mortgage payments aren’t required, you can make voluntary payments toward the loan balance.
With a HELOC, the effect on your equity depends on how much you borrow and how much principal you repay over time.
The HomeSafe Second reverse mortgage is a proprietary product of Finance of America and is not related to the Home Equity Conversion Mortgage (HECM) program. HomeSafe Second is only available in certain states. Please contact us for a complete list of availability. Terms and conditions on the first lien loan apply. Must meet combined loan value requirements based on a satisfactory appraisal.
Still deciding between HomeSafe Second and a HELOC?
If you need additional help comparing your options, a Finance of America loan advisor can answer questions about HomeSafe Second and help you understand how it may fit your situation. Call 800-841-5166 to speak with a loan advisor.
You can also use our reverse mortgage calculator to estimate how much home equity you may be able to access.
To learn more, please visit the CFPB’s “Reverse Mortgages: A Discussion Guide.”
The HomeSafe Second reverse mortgage is a proprietary product of Finance of America and is not related to the Home Equity Conversion Mortgage (HECM) program. HomeSafe Second is only available in certain states. Please contact us for a complete list of availability. Terms and conditions on the first lien loan apply. Must meet combined loan value requirements based on a satisfactory appraisal.
FAQs about HomeSafe Second vs. HELOC
Can I lose my home with a HomeSafe Second loan?
Yes, but only if you fail to meet your loan obligations. These include living in the home as your principal residence, paying property taxes and homeowners insurance, maintaining the property, and meeting the obligations of your first mortgage.
→ Read more: Reverse mortgage foreclosure: How it happens and what to do next
What happens to HomeSafe Second if I refinance my first mortgage?
HomeSafe Second may remain in place if you refinance your first mortgage, subject to Finance of America’s approval of the required subordination. Because HomeSafe Second must remain in a subordinate lien position behind the new first mortgage, Finance of America must review and approve the subordination request.
Can I pay off HomeSafe Second early?
Yes. You can make payments toward your HomeSafe Second balance or repay the loan in full at any time without a prepayment penalty. Paying down the balance reduces future interest accrual.
Can I have a HELOC and HomeSafe Second at the same time?
In some cases. If the HELOC is the existing first lien and is already in its repayment period, it may remain in place with HomeSafe Second. If the HELOC is in a second-lien position, it must be paid off and closed as part of the HomeSafe Second transaction.
How old do I need to be to get HomeSafe Second?
The minimum age for HomeSafe Second is 55 in most states, with these exceptions:
- Massachusetts, New York, and Washington: 60 years old
- North Carolina and Texas: 62 years old
HomeSafe Second is not available in all states. Check with a Finance of America loan advisor about availability and age requirements in your area.
Can I use HomeSafe Second funds for any purpose?
Yes. HomeSafe Second funds can be used for any purpose—there are no restrictions on how you use the money. Borrowers commonly use the funds for home improvements, medical expenses, debt payoff, living expenses, or other financial needs.
1Non-recourse means that you, or your estate, can’t owe more than the value of your home when the loan becomes due and the home is sold. Non-recourse means that if you default on the loan, or if the loan cannot otherwise be repaid, the lender cannot look to your other assets (or your estate’s assets) to meet the outstanding balance on your loan.
About the author
is a Senior Web Content Writer at Finance of America and a journalist with more than 20 years of experience specializing in business, and technology. Her work has been published in The Wall Street Journal, The Financial Times, and numerous other leading outlets.
Disclaimer
This article is intended for general informational and educational purposes only and should not be construed as financial or tax advice. For tax advice, please consult a tax professional. For more information about whether a reverse mortgage fits into your retirement strategy, you should consult your financial advisor.
