Join Bruce Simmons as he explores the role of reverse mortgages in retirement planning. From maintaining control over your primary residence to creating an additional income stream, reverse mortgages open up numerous possibilities for financial flexibility. Learn how reverse mortgages can aid in managing healthcare costs, home repairs, or even funding travel and leisure, making your retirement years more enjoyable and financially stable.
Hello and welcome to another episode of Reverse Mortgage Radio. Very glad you’re here today and I truly hope that you had a fantastic Christmas. I know I did and I’m looking forward to 2025. We’re coming up on year’s end, of course, and that’s what we’re going to talk about today on Reverse Mortgage Radio is we’re going to talk about how a reverse mortgage can help you plan financially for 2025, giving you more control over your home equity, retirement, and even your future. All right, let’s jump right into it. First of all, if you have any questions about reverse mortgages, please feel free to call me. My name is Bruce Simmons. I’m the reverse mortgage manager for American Liberty Mortgage here in Denver, And coming up on January, I’ll have been doing reverse mortgages since 2003. That’s 22 years. That’s the only loan that I do. I don’t mess around with any of these other loans. I’ve got an idea of how they work, but it’s been 22 plus years since I’ve closed a normal loan or what I like to call a forward loan. So a lot’s changed in that time period, just like a lot’s changed with reverse mortgages too. And that’s why I focus on reverse mortgages because it’s its own business. industry. And to really do it well, I felt like I needed to focus completely on reverse mortgages. But if you have any questions about reverse mortgages, how they work, whether you qualify or not, whatever the case may be, please feel free to call me. You can reach me directly on my number at 303-467-7821. That number rings directly to me, 303-467-7821. You can also visit me online at reversemortgageradio.net. ReverseMortgageRadio.net. Next week, this entire show, the whole podcast will be up on my website, and you can listen to the entire show in case you have to leave. If you’ve got an appointment here in the next 10 or 15 minutes and you can’t stay for the whole thing, please go to my website at ReverseMortgageRadio.net and download my radio show. You can also download my free consumer guide as well, or even input some information, some very basic information, no social security number or anything, the basic information, and you can get right then and there information on whether or not you’d qualify for a reverse mortgage. All right, let’s jump into this now. What is a reverse mortgage? First of all, that’s important that we need to talk about that. In a nutshell, most reverse mortgages, 95% plus, are FHA-insured loans. FHA stands for Federal Housing Administration, and they oversee, they’re under the umbrella of HUD, Housing and Urban Development, and they oversee reverse mortgages. They set the rules, basically, that we have to play by, the lenders. A reverse mortgage or any government loan, for that matter, is not a loan from the government. It’s a loan that’s insured by the government in the form of FHA. VA is a little different, but FHA is an insured loan. So basically what that means is the loan is originated and serviced by private companies, but FHA guarantees to the lender, actually, the lender. that they’re going to get their money, all right? They do that through mortgage insurance. But indirectly, it also protects your other assets, the way reverse mortgages work. Now, like I said, I don’t really understand much about forward loans anymore, but we’re only talking reverse. The FHA-insured reverse mortgage is called the Home Equity Conversion Mortgage, HECM. That’s the name for the reverse mortgage program that FHA insures. There are other loans like HomeSafe or Platinum, things like that, that are proprietary reverse mortgages. They are not FHA insured. Sometimes those are great for people who might have a condominium that is not FHA approved, like a small condo that doesn’t have approval by FHA or multi-million dollar homes. If you get a $2 million home, but you’re considering a reverse mortgage just for cashflow purposes, a lot of people have these expensive homes now, million and a half, $2 million homes, but they’re not like The mansions, like we used to think when we were younger, like, oh my goodness, you have a $200,000 home? Well, yeah, that’s when the average home cost about $150,000. You know, a million dollars meant a lot then. Now the average home is $600,000 or whatever it is. A million dollars doesn’t seem quite so much, or $2 million even. They’re nice homes, but they’re not extravagant. It’s not like you’re living on a big estate. So anyways… But today we’re talking about the FHA insured loan, the HECM, Home Equity Conversion Mortgage. It’s a loan that’s specifically designed for people who are 62 and over. It allows you to convert a portion of the value of your home into money that you can use that you never have to repay as long as you live in the home. Now, the home stays in your name, so you do have to continue to pay your property taxes and insurance. And it can only be on your primary residence, so you have to continue to live there, either you or your spouse, as your primary residence. You also have to keep your name on title and maintain the home. So all those things have to be done. As long as you do those five things, which you do anyway, right? But as long as you do those five things, you never, ever, ever have to make a mortgage payment. You can make payments. This is a payment optional program. Now, 90 plus percent of people do not make payments, but I’ve talked to a number of customers who’ve done a big lump sum. They get an extra $10,000 and they apply it towards their loan or what have you. Or some people will pay on a regular basis, but it’s not required. The nice thing is that if you do decide to pay some, then the amount of interest in mortgage insurance you’re charged is limited. I mean, you’re still charged it, but the effects, I should say, are limited on your loan balance. Because if you do not make a payment, you’re charged two things every month, regardless of if you pay or not. One is interest and one is mortgage insurance. These get added to your loan balance. Your loan balance increases with a reverse mortgage if you choose not to pay. Every month you get a statement in the mail and you’re going to see that balance getting bigger and bigger and bigger over time. If looking at that statement and seeing that loan balance get bigger is going to cause you more stress than the benefits you get from the loan, do not do the reverse mortgage. I don’t want you to do it if that’s the way you are going to view this because it’s intended to relieve financial stress, not create it. All right? Let’s keep that in mind. So every month, your loan balance gets bigger and bigger. But odds are, No matter how long you keep the loan, you’re going to have a lot of equity in the house. The reason for that is through normal appreciation, your value is increasing on the home. And if we see appreciation at all, like we have in the past few years, you’re going to see an average, even just 4% a year. Well, let’s say you’ve got a $500,000 home. you’re gonna see 4% appreciation, that’s $20,000 in that first year, you’re gonna see an appreciation in your home at 4%. If you take out $200,000, and let’s say you’re charged 7% on 200,000, that’s $14,000 that you’re charged. Well, your loan balance increased by 20,000, you were charged 14,000 that you didn’t pay, But it got added to your loan balance. So you still gained, without making any payments at all, you still gained $6,000 in equity in your home. And that’s kind of an extreme example. But still, that gives you an idea. Because most people don’t carry that big of a balance on their loan. A lot of times, somebody may have a $700,000 or $800,000 home and they owe $150,000 on their mortgage. So their home is appreciating a lot faster as a percentage of the value, even at the low percent of the low appreciation of 4%, I mean. So keep that in mind. But essentially, that’s how it works. And you just have to be okay with the fact that your loan balance is increasing over time. But let’s talk about… The financial challenges that people have in 2025. I saw an article a couple of weeks ago from MSN. The five things that could spoil your retirement and your plan to retire in 2025. And they talk about holding too many volatile investments. You know, they talk about that 60-40 split, 60 stocks, 40 bonds, or vice versa, depending on your age and all this stuff. Well, stocks and bonds both can be very volatile. depending on interest rates and inflation and all that stuff. But what happens is if you’re carrying a volatile investment portfolio into retirement and those values drop, that could be devastating for your retirement, even five, 10 years down the road as well. Because if you have to access that money when the values drop, that’s where you really get stuck. Also too, another risk that this article talks about is changing retirement goals. Like they say here, for example, maybe you plan for a quiet retirement in the country, but you retire and that’s not really what you want. You decide you really want to travel and you need a lot more money for something like that. They also mention unexpected requests for financial support. family, right? If you’ve got an adult child, maybe they get sick and they need your help and you want to help them. Well, that’s going to throw your retirement for a loop if you have to access a lot of money to help them out with that. Or if you yourself have unforeseen medical issues and you have to come out of pocket with deductibles or anything like that, Or you can’t do what you want to do and you need to revamp your house for a wheelchair or other issues that can go along with poor health. And especially if that happens early in your retirement. But then, too, they also mentioned, lastly, not leaving enough financial wiggle room. And the thing that kills me on this is they say, the solution is to save a little more than you need for retirement. Well, wouldn’t that be nice, right? I do a lot of reverse mortgages for people who seem like they’re well off. Maybe they’ve got $100,000 or $200,000. That’s not going to last that long if you’re sick, if you need to help family, if the money or the investments that that money is tied up in drops. That’s not that much money. And most people in retirement know that. They’ve got to be very, very frugal with that money. So a reverse mortgage can definitely help out in those types of situations, especially if you’re making a mortgage payment or let’s say you just need some additional money to set aside for emergencies, to pay your property taxes and insurance, whatever the case may be. Having that money available for that purpose is a lifesaver for people. Also, too, now the second thing I want to talk about here, though, is using a reverse mortgage to support retirement income. Let’s say you want to retire at 67, but it makes a whole lot more sense to start drawing Social Security at 70. Now, if you do the math, it may or may not make sense for you. I looked at the math on that and I’m going to start drawing at 67. I think even though one financial advisor said I should wait, I’m only 59 and a half right now, but they said you should wait till you’re 70. Another one said, well, If you do the math and look at this, you know, it balances out. You just have to live to be 83 or whatever it is. I don’t remember the numbers, but it made sense. So I said, OK, well, maybe it does make sense to start taking it at 67. But let’s say you want to wait. and you need some additional money. You need income, but a reverse mortgage is not income, so I don’t like to call it income. We can deposit money every month into your bank account. Let’s say we have to pay off an existing mortgage of $100,000 and you’ve got another $150,000 available, so you can access $250,000. Now, most of the time, people in their mid-60s are going to be able to tap into roughly about 35% of the full value of your home. Not 35% of your equity, but 35% of the value. So if you have a million-dollar home, you can access $350,000. If you owe $150,000 on your mortgage, you pay off that existing mortgage, that leaves you $200,000 left over. And that’s how that works. So sometimes people will call me and they say, I’ve got $400,000 in equity. Well, they have an $800,000 home and they owe $400,000 on it. And I can only loan 35% or even 40%. And it’s not enough to even pay off the existing mortgage because that’s a requirement with reverse mortgages is we have to pay off the existing mortgage on your home. We eliminate that mortgage payment for you. So the reverse mortgage is the only loan against your home. But in some cases, depending on your financial situation, how much you owe on your house compared to the value, all that stuff, we can create a monthly stipend for you where we deposit money every month into your bank account. If you own your home free and clear, for example, and you say, hey, I just need an extra $2,000 for three years to get me to 70 so I can start drawing Social Security, we could set up a term plan for you for three years. You get this money every month for three years, and at the end of that three-year period, the payment stops. The loan does not come due, but the payment will stop. Or other people will say, you know what, the cost of inflation and all these extra expenses every month, I’m running out of money before the end of the month. And I need just an extra $700 a month. We’ll… Do wonders for me. Allow me to go out to lunch now and again with my friends or allow me not to stress the last couple weeks of the month or the last week or two before I get my Social Security. You know, maybe you’re always running behind because your bills come due on the 10th, but you don’t get your Social Security check till the 20th. So you’re always paying this extra late charge on whatever bills it is, and it really stinks. Well, that extra $500 allows you to catch up, or maybe we could give you some additional money to pay off some bills and then give you that additional money every month so you stay ahead. Things like that can make all the difference in the world for people. Think about that as a way of doing it. Planning for health care costs, too. Having that extra money available for long-term care or Maybe you have long-term care insurance and it’s getting really expensive right now as you get older and older. It’s getting more and more expensive. Well, a reverse mortgage might be able to help you cover that cost. And in some cases, like with me, what I plan to do is I’m going to set up a reverse mortgage and leave it. That’s an emergency fund or hopefully use it for long-term care down the road if needed. Hopefully I’ll never need it and I won’t even ever have to access it. But it’s there and that provides that peace of mind. Also, another way to use a reverse mortgage in 2025, and we talked about this a couple weeks ago, is home repairs, maintenance, and upgrades. That’s important. You have drafty windows, these old aluminum windows from 1968 in your house. It’s time for an upgrade. And maybe getting an extra $25,000 on your reverse mortgage so you could upgrade the windows and save yourself an extra $50 a month in heating or whatever allows you to live a more comfortable lifestyle. And even being able to sip a cup of coffee by your kitchen window and look out at the snow without freezing, wrapping up in a blanket. Just enjoy your hot cup of coffee or tea. Wouldn’t that be nice, right? The other thing, too, is if you do end up in a wheelchair, what happens? Do you have money to build a ramp? Or do you have money to widen the hallways or the doorways so you can get through with a wheelchair? Do you have the money to set up a walk-in tub so you can have your wheelchair right there and just get in so you don’t have to stumble over a tub to get in to take a shower? However that may be, all those different things. A reverse mortgage can help with all that stuff. It can fund any kind of those home improvements as long as there’s enough money. That’s always a factor that you have to consider because, like I said, we can’t loan 70% or 80% of the value. Just be aware that this could help you stay in your home and save you money. If you could make these, say, $30,000, $40,000, $50,000, $60,000 in savings, improvements or adjustments to your home so you could stay in the home and not have to pay to go to some home that you don’t even want to go to anyway, right? That’s the benefit of a reverse mortgage. By the way, if you just tuned in, you’re listening to Reverse Mortgage Radio. My name is Bruce Simmons. I’m the reverse mortgage manager for American Liberty Mortgage here in Denver. You can reach me on my direct line at 303-467-7821. 303-467-7821. And today we’re talking about ways that a reverse mortgage can help you plan financially for 2025 and allowing you more freedom and access to your equity. And the thing is, some people say, well, I’d rather have a HELOC, a home equity line of credit. They’re cheaper to get set up and all this. But those can be cut like that. If the value of your home drops, which I really don’t anticipate, If your financial situation changes, though, they can cut your line of credit just like that, and that cannot happen with a reverse mortgage. Plus, you have to make payments on that loan where you do not have to make a mortgage payment on the reverse mortgage. Now, you do have to pay your property taxes and insurance, like we talked about before. You have to live there as your primary residence, keep your name on title, and maintain the home. As long as you do those things, no mortgage payment, the principal and interest are actually required. All right, let’s continue on now. The other things you could do is obviously pay off debt. That’s a simple one. That can save people hundreds or even a thousand dollars or more every month by eliminating your mortgage payment and paying off a couple of credit cards. I talked with a guy this week who he had like a $1,200 principal and interest mortgage payment. The guy’s almost 80 years old, and he’s got a couple of credit cards for $15,000 total. We could save this guy about $1,500 a month. And he’s got a lot of money left over that he can access if he needs it as well. He hadn’t seen his two sons that live out in the Midwest somewhere in years because of COVID. And then he didn’t have the money. And he’s got grandkids he hasn’t seen since they were wee little babes. And now they’re teenagers, a couple of them. So he’s really looking forward to getting this reverse mortgage in place to save a lot of money every month and then also to be able to afford to go see family. Travel and leisure are so important. If that’s what your goal is, a lot of people love to travel the world. I know my wife’s grandmother, she was in her 80s when she went to India or someplace and she ended up flying over the top of Mount Everest. in an airplane just to check it out and obviously she couldn’t climb Mount Everest but it was just she was a world traveler and she did that her entire life until I think she was about 89 years old when it just her health kind of started to fade she lived to be 93 But every winter or every summer, she’d leave from Arizona and go up to Utah to take classes and stay in a dormitory and stuff in Utah. I can’t remember what school it was. But she just always was telling us things that she learned, and she was just such an adventurer. And that just added to her life so much. Imagine if you could do something like that. If that’s what your goal is, that’s the bottom line is being able – To live the life you want to live in retirement. The other thing, too, is that the memories that you’re sharing with your family. You’d say, oh, well, I’m going to be giving up all this equity. Well, number one, we talked about that, where you’re still going to have some equity left, most likely. But even if there was no equity left at all in the home, let’s say you ended up owing more on the home than it’s worth. Remember, there’s mortgage insurance on this loan. So you can never, never pass a debt beyond the value of the home to your estate or your heirs. You’re never going to leave anybody with a debt. Worst case scenario is that there’s no equity left in the home. But let’s say that happens. But yet you’ve been saving $1,500 a month like this guy just talked about, this 80-year-old, 79. He’s going to be 80 here in a few months. He’s saving $1,500 a month. What if he saved $1,000 of that? What if he saved $500? Just $500. Then he lived another 10 years. That’s what? Another $60,000 he has in the bank. Not counting any interest or anything like that. He just put away $60,000 in a 0% interest or 0% savings account. He put $500 a month. That would be $6,000 a month for 10 years if he lived to be 90. Now that’s $60,000 extra that he has in his bank that he can give to his family. And then also, too, the memories. Talk about gifting family. What about all the memories that he can have with his family because he can be there with them to celebrate holidays, to see birthdays, whatever the case may be. Maybe he takes them on a trip somewhere. I know my wife’s parents did that with our kids when they turned like 13 or something, 12 or 13, when they went to middle school. I don’t remember when it was. But each grandchild got to go on a trip with their grandparents. I mean, that’s priceless. No matter how much equity you use, that and creating those memories for your grandchildren so they get to know you and your values and you can share what’s important with you with them. All of these things. So you got to remember that stuff. There are some requirements with a reverse mortgage, so I want to touch on those real briefly before we finish up here. You do have to qualify income and credit-wise. However, our income qualification is a lot easier than a traditional mortgage. So if you came to me and you said, hey, I got turned down because of this equity line because they said I didn’t have enough money, it’s very possible that you could qualify for a reverse mortgage. Now, it depends on your situation. Everybody’s situation is a little unique. But I’m working on a loan right now for a lady who got turned down because they said she didn’t have enough income. Well, one of the benefits with reverse mortgages that we can do, we can use loan proceeds as if it were income. It’s not, but we can still count it that way. Let’s say we think you’re going to live in your home another 10 years. And there’s actuarial information depending on your age. So you’re 73 years old. We think you’re going to live in your home until you’re 83. And you’ve got $100,000 available in your line of credit after paying off your mortgage. Number one, we don’t count a mortgage payment against you. That’s huge. But then you’ve got this extra money, this $100,000, and we divide that out. And let’s say we can figure it out and it works out to be an extra $650 a month to you. We can count that as income to help qualify you. You also have to have good credit. Well, let me re-qualify that. It helps and it’s easier if you’ve got good credit. Okay, we don’t look at credit scores, but we do look at how you’ve paid your bills, especially your mortgage payment, your homeowner’s insurance, your HOA bills. We look at that too, which a traditional mortgage doesn’t. Those are the most important ones, the property charges. But if you’ve got a bunch of collections and things like that in your credit, that doesn’t mean we cannot help you. It just means that we have to then set aside money to pay your property taxes and insurance on your behalf because we can’t really trust that you’re going to be able to do it. So right now, your taxes and insurance are escrowed, let’s say. You’ve got a $1,500 mortgage payment. $500 of that goes to taxes and insurance. Well, that means you’re saving $1,000 a month. Which is great. You say that I could easily pay my taxes and insurance because I’m not paying that mortgage payment. Now I’ve got that money. And then after paying my taxes and insurance every month, setting up an escrow account and saving, I’ve got this extra thousand dollars. But if you’ve got bad credit, we’re going to say, no, we’re going to do that for you. Well, how does that work? Because we can’t bill you every month for five hundred dollars. We have to take that $500 a month and we calculate how long we think you’re going to live in the home. And then we set aside money that we normally would make available to you. Let’s say, for example, you take $100,000 to pay off your mortgage and you’ve got another $100,000 available. But yet, we think that to pay your taxes and insurance for the next 10 or 15 years or whatever, it’s going to cost about… $55,000. We’re going to take away $55,000 from that $100,000 that’s available to you, and we’re going to set it aside in an escrow fund. You’re not charged interest on it until it’s used, and then we’re going to use that money to pay your taxes and insurance, and then you’re going to have the rest of the money available to you, the $45,000. You just have to have enough money for us to be able to do that. But feel free to call me with questions. My number is 303-467-7821. My name is Bruce Simmons. I’m the reverse mortgage manager for American Liberty Mortgage here in Denver. And I hope that you have a fantastic 2025 and you can… hopefully have a better fantastic 2025 with a reverse mortgage. So give me a call with any questions about how that works or visit me online at reversemortgageradio.net, reversemortgageradio.net. You can also listen to the podcast of this show next week. It’ll be up next week. Either way, hopefully you have a fantastic happy new year and take care. Have a great day.
