Join Bruce Simmons on Reverse Mortgage Radio as he welcomes the New Year with a vital discussion on utilizing reverse mortgages in 2025. The episode provides valuable insights into how senior homeowners can strategically transform their home equity into a powerful financial resource. Discover the various ways, beyond just debt relief, where a reverse mortgage can be part of your financial planning—such as covering healthcare costs, funding home modifications for age-in-place living, or even supporting your grandchildren’s education. Bruce emphasizes flexibility while also guiding you on regulatory aspects and maximizing the benefits of this tool. Bruce shares his 22
Welcome to Reverse Mortgage Radio, hosted by Legends’ very own reverse mortgage professor, Bruce Simmons. You have so many options with a reverse mortgage, everyone has a different opinion, and the government keeps changing the rules. You need to hear from the first certified reverse mortgage professional in Colorado to specialize exclusively in reverse mortgages, one of few in the state with the letter CRMP after his name. Bruce has the specific training and education you need to understand what you’re buying. Now, here’s your host, Bruce Simmons.
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Hello, and a belated Happy New Year’s to you. Hopefully you enjoyed the New Year’s celebration, didn’t get too wild. I partied all night long with my wife and a puzzle. That was our excitement for the evening. That’s what happens as you get older and older, I guess, right? Well, today, what I want to talk about really harkens back to a 2013 article that was in Reverse Mortgage Magazine, which is a magazine that’s put out for industry professionals by the National Reverse Mortgage Lenders Association. And they talked about 25 ways to use your home equity. And I’m talking about today, 25 ways to use a reverse mortgage in 2025. So let’s have at it. Oh, by the way, Before we have at it, I do want to let you know you are listening to Reverse Mortgage Radio. My name is Bruce Simmons, and you can reach me directly at 303-467-7821. 303-467-7821 is my direct line. My website is reversemortgageradio.net, reversemortgageradio.net. And you can get on there and download my free consumer guide, totally free. You can get a free quote as well. And it’s not one of these things where you plug in all your information, no social security or anything like that. But you plug in basic information about your home, your zip code, I think, your ages, and that’s about it. And then the value of your home, obviously. But then it’ll tell you how much money you can get from a reverse mortgage. Now, it’s a very conservative estimate. Odds are we can end up loaning you more than what that program says. but I have to be very cautious because it is putting it out there for everybody to see. And I don’t want people to accuse me of a bait and switch type situation. So I always do better than what you get on the website. That’s just for your knowledge. You can’t apply for a reverse mortgage. You can send me your information and then I’ll call you and we can go from there. But That’s the best way to reach me, reversemortgageradio.net, or just pick up the phone and call me at 303-467-7821. If any of these ideas we’re going to be talking about strike a chord with you. If you think that, hey, that’s interesting. I didn’t know we could do that. That may work for me. Give me a call and we can go over the details. But before we get into all the different ways a reverse mortgage can be used, I do need to kind of explain some basics about it. A reverse mortgage most often is an FHA insured loan that’s specifically designed for people that are 62 and over. And that’s the program we’re going to be talking about today. There are non-FHA loans available, but they’re not quite as flexible as the FHA insured one. And the FHA insured Reverse mortgage is called the home equity conversion mortgage or a HECM, H-E-C-M. That’s how I refer to it as a HECM. And so that’s the one we’re going to be talking about today mostly. Although some of these options, a lot of the ways to use it can be used with a proprietary loan as well. So if you’re in a condominium, let’s say you’re in a condo that is not FHA approved, it’s very possible we could still do a reverse mortgage for you. It just would not be a HECM. It would be a non-FHA-insured reverse mortgage, which doesn’t make it better or worse. It’s just different. It’s just a different reverse mortgage program. But the way most reverse mortgage programs, or let’s focus on the HECM. The way the HECM works is it is an FHA-insured loan that’s specifically designed for people that are 62 and over. It allows you to convert a portion of the value of your home into money that you can use. You never have to repay it as long as you live in the home. There’s no mortgage payment, no principal and interest payment required. However, however, however, you do have to continue to pay your own property taxes and insurance because the home stays in your name. You’re not giving up title. You have to maintain the home. You have to keep your name on title and live there as your primary residence. As long as you do those five things, you can never, ever, ever be kicked out of the home. Nobody can ever call the loan due, anything like that. You could be upside down even on the house. You could end up owing more on the house than it’s worth. Now, wait a minute. I didn’t explain. How does that work, right? Well, let me explain. Because you’re not making a payment, and most people don’t make payments, you can make a payment on this loan if you want, but most people choose not to. And for those who choose not to make a payment, you’re still charged interest every month, interest and mortgage insurance. This is an FHA-insured loan. Because it’s FHA-insured, all… FHA-insured loans, forward and reverse, have mortgage insurance on it. And that protects the lender so that if the lender were ever to lose any money, they’re not going to lose any money. They’re going to get it from the mortgage insurance pool. So they’re not going to come after you, your estate, or your heirs should you end up owing more on the home than it’s actually worth. Now, how can that happen? Like I said, you’re charged interest every month, but most people don’t pay it. what happens to that money? That money that you’re charged in interest and mortgage insurance gets added to the loan balance every single month. Every month you get a statement in the mail and you’re going to see that loan balance getting bigger and bigger and bigger. If you borrow $100,000 today, next month you might owe $100,500. The month after that you might owe $101,001. After that you might owe $101,502. So that money gets added to your loan balance. The interest that you’re not paying gets added to your loan balance every month, and it compounds. So over time, let’s say 10 years from now, that $100,000 has turned to $200,000. Now, odds are the value of your home has probably gone up by $100,000 or more in that 10-year period as well. Your home might have gone from a $400,000 value to $450,000, but your loan balance grew from $100,000 to $200,000. So you’ve got to keep all these things in mind. You’re still gaining equity most of the time, even when you have a reverse mortgage and you’re not making a payment, because the normal appreciation here in Colorado, at least, is the it’s a pretty good amount, even in this market. This market’s holding kind of steady, but still, we’re gaining 2% to 4%. Most places are. Now, they had a little dip, but it’s coming back. So over time, you’re going to gain more than you lose. Odds are. Now, there’s no guarantee. That’s why that mortgage insurance is in place to protect your estate. You, your estate, and your heirs. Should you ever end up upside down? Because who knows? Another 2008 where property values drop in half could happen. Not likely. Not likely at all. But it could happen. All right. So that is, in a nutshell, how a reverse mortgage works. There’s different ways you can take the money out from a reverse mortgage. Basically, FHA dictates to us, the lender, how much money we can loan. It’s based on three factors. the age of the borrower and the spouse, the value of the home, and the interest rate. Unfortunately, as interest rates go up, the amount we can loan as a percentage of the value of your home goes down. Now, this is one thing I want to explain real quick too. A lot of people will call me and they’ll say they think that they could borrow 30% or 40% or 50% of their equity. And that’s not true. It’s 30 or 40 or 50% of the value. The equity in your home is just the difference between the property value and the loan balance. If you have a $700,000 home and you only owe $200,000 on the house, you’ve got $500,000 in equity. So you might call me and say, hey, I want to borrow 30% of that $500,000, which is $150,000. Well, the problem is that’s not how we calculate the loan amount. We calculate it based on the value of the home. For example, let’s say we could loan you 35% of the value of $700,000. That’s roughly $250,000, $245,000. That’s the maximum we can loan. And from that, we have to pay off the existing $200,000. So in that scenario, we can loan you $250,000. Let’s just round it off. I think it’s $245,000, but let’s say $250,000. We have to pay off $200,000 that you owe on your current mortgage because a reverse mortgage can be the only loan available. That leaves $50,000 left over that you have access to with a reverse mortgage. We can’t loan a percentage of the equity. We loan a percentage of the value. And that’s important to remember when you’re considering whether or not a reverse mortgage makes sense for you. Okay, that’s enough of that stuff. Let’s jump into the different ways that a reverse mortgage can be used because this is the most incredibly flexible program that I’ve ever seen. I can’t think of another program anywhere close to it that has the flexibility of the ways that you can receive money on a reverse mortgage. you can receive it as a lump sum. Now, there’s restrictions on that. If you call me up and you say you own your home free and clear and you want to take out $250,000, we can’t give you all $250,000 in one lump sum. Now, with a proprietary loan, you could get that, but not with a HECM. The HECM only allows you to take out 60% of that $250,000 that might be available to you, even if you own your home free and clear. The other… 40% of the money that’s available to you will be available a year later. So there’s some restrictions on the lump sum. But then you can also take it as a monthly payment. Let’s say you want to take it guaranteed as long as you live in your home. So we take that $250,000 and we set it aside into like an annuity, but it’s only payable as long as you live in your home. It’s not payable for life like a lot of annuities are. It’s payable for as long as you live in the home. But you might be guaranteed $1,000 a month, guaranteed as long as you live in your home. If you live to be 110, you can still get that money, no matter what happens to the value of the house, no matter if you use way more than $250,000, okay? Another way you could take it on a monthly payment is on a term payment. Let’s say a 10-year, the monthly payment guaranteed as long as you live in the home is called a 10-year, T-E-N-U-R-E plan. Let’s say that plan only pays you $1,000, but you need $3,000 a month. Well, maybe we could do $3,000 a month, but it might only last you for, say, 12 1⁄2 years. And at the end of that 12 and a half year term, it’s called a term payment, the payment would stop. The loan does not come due. And there’s a possibility you might even be able to refinance, but no guarantees. But then at the end of that 12 and a half year term, the payment stops. The loan doesn’t come due. You continue to stay in the home. You just no longer have access to that money. Another way, one of the most popular ways is a line of credit where you take out the money in a line of credit and it’s available to you. You’ve got $250,000 and you just draw it out as you need it. You need $20,000 for paying off debts right now. You need another $10,000, say, six months from now for a new furnace. And then you need some home improvements, so you take out some more money. And you could pay it back and reuse it, just like a HELOC, only it’s guaranteed as long as you live in the home. That line of credit can never be closed out as long as you’re paying your taxes correctly. You’re paying your insurance. You’re maintaining the home. Living there is your primary residence. That’s requirement. And you keep your name on title. So there’s also a combination. That’s what most people do, is some form of combination. Let’s say you owe $100,000 on your first mortgage. and you want $20,000 out in cash. So that’s the lump sum, $120,000. But then you say, well, I want $1,000 a month for the next five years. So that’s another $60,000 that we set aside for you and pay you $5,000 a month for the next five years. And then the rest of the money, let’s say, is left in a line of credit for emergencies that you could tap into when you need it. That’s the incredible flexibility of this program. And it can be changed. That’s also one of the wondrous things of this. You can change the way you receive the money. In fact, this week I had a meeting with a customer who was receiving $1,500 a month. She was going to get it for like 15 years. Well, it turns out she only needed it for like four years. I think it’s been four years since she took it out. So I went to her house. And I helped her fill out the paperwork to change the payment plan to cancel that payment. She no longer needs it. And that’s one of the beauties of it. There’s a one-time $20 fee anytime you make a change to the plan. Keep that in mind. It can be stopped. It can be turned on. It can be turned off. It could be accessed. It could be paid back and reused, all these things. So let’s get into the 25 ways you can use a reverse mortgage. Remember, if you have any questions about reverse mortgages, any of these ideas on how to use it trigger something in you, give me a call, 303-467-7800. That’s my direct line. Bruce Simmons is my name, and I’m the reverse mortgage manager for American Liberty Mortgage. I’ve been specializing exclusively in reverse mortgages now for 22 years, since 2003. 22 years ago, I started in reverse mortgages. And I’ve seen a lot of different things and a lot of changes in this program. But you can visit me online as well at reversemortgageradio.net. All right. First of all, obviously, like we talked about already, pay off your forward mortgage to reduce your monthly expenses. Remember, you still have to pay your taxes and insurance, but you eliminate the principal and interest payment. I spoke to somebody earlier this week, $1,200 a month. on their mortgage insurance. He got laid off, can’t find a job, and he was in his job for like 40 years or some crazy long time period. Same job, and new management came in, got rid of him. Isn’t that terrible? And now he wants to pay off his mortgage so that they could afford to just retire. And if something part-time comes along, he could do it. A reverse mortgage allows you to do that as long as we can loan you enough to pay off your existing mortgage. In that guy’s case, he was short, and he’s debating on… If he can come up with enough money to pay his mortgage down to where we can loan him the difference to pay off the mortgage. All right. People can use it to remodel your home and use it to accommodate aging in place. That’s one thing, too. You can widen hallways or doorways so you can get a wheelchair through or just paint different color paint and carpet so your walls are white, your carpet is more of a a darker brownish color or something like that, whatever. Just so that they’re not all the same color because your eyes can be tricked, especially in darkness. It can be really tricky and it’s easy to stumble or what have you. Maybe you want to get a chairlift so you could go up and down the stairs easier. A lot of different things that a reverse mortgage can help you with. The other thing too, people love, love, love the reverse mortgage line of credit for emergencies. So you set aside this line of credit and you’ve got all this money available to you if you ever need it. If you never use it, you’re not charged interest on it. And the line of credit has a very unique feature that is only available with a HECM. And it’s not available on the proprietary program either. But the line of credit grows. It grows at a half a percent greater than the interest rate you’re charged. If you’re being charged 6.5%, that line of credit’s growing at 7%. If you have $100,000 in there today, a year from now, you’ll have a little over $107,000. That’s a pretty sweet deal. And it’s not interest. You’re not being charged interest. If you use it, you don’t have to pay taxes on the money you use. You can pay it back, too, and get additional money in the line of credit. So it’s a very, very flexible thing. cover monthly expenses and hold on to other assets while their value continues to grow. This is something that is so underused, using it as financial planning, uh, like use it. Maybe you want to take a special trip and you don’t want to pay taxes on the assets that you pull out of an IRA. So you use the reverse mortgage assets or the reverse mortgage to pay for it instead of taking these assets out all at once and, and having to pay a bunch of taxes on it, or, or you’re allowing it to continue to grow as well too. Um, let’s see, cover monthly expenses with a reverse mortgage to avoid selling assets at depreciated rates. We’ve been very blessed with this stock market, but if you’ve got money in the stock market and it drops and you’re like, okay, I’ve got $200,000 in there and it drops and now it’s only 150, you don’t want to access that money, any of that money because you’re a locking in the losses in that case. And whereas you know it’s gonna come back, it always does, right? Well, hopefully it does, in time it will eventually, but that’s one of the great ways to do it. So that’s the first five things, using it as a financial planning tool. in conjunction with other assets is a fantastic way to use the reverse mortgage. And that’s the line of credit. So number six, you could pay for health insurance during early retirement years until Medicare kicks in at 65. A lot of people get laid off at 62 or 63, or they want to retire, and now they’ve got all this $1,000, $1,500 in medical insurance payments, and you can use a reverse mortgage to cover that cost. You can use it to pay your Medicare Part B and Part D costs as well, especially if there’s a donut or something. You fall into that donut, if that’s still around. I think it is. And now you’re stuck paying all those prescription costs. Use the reverse mortgage for that. You can combine the 10-year payment, remember that’s that guaranteed payment as long as you live, with Social Security and other income generated from your assets to replace your salary and maintain your monthly routine of paying bills from new income. So you don’t have to worry about, you can retire basically and keep the same income level. That’s an awesome way to do it. pay for children’s or grandchildren’s college or professional education. Just imagine the gift that you could give to a grandchild or multiple grandchildren, even if it’s not the full ride. You say, okay, I’m going to give you $2,500 a year towards your college or towards your auto tech school or your welding school, whatever it may be, beauty school, whatever. That way, they’re not going to be saddled with as much debt. Just imagine how nice that would be for them to start life without a ton of debt from school. Number 10, maintain a standby cash reserve to get you through the ups and downs of investment markets and give you more flexibility. This is kind of related back to, I think, number five, where you have this line of credit available. The stock market drops. You don’t want to tap into assets at a depreciated rate. It’s a way for you to keep that money in there to where it can grow back. And then sometimes, too, people will take it out when they hit their required minimum distribution. So you take out money. You don’t need it. You’re required to take it out, but you don’t need it. You can pay down your reverse mortgage at that time. Use that asset for that and still have that money available. tax-free. Talk to your financial advisor about this. If your financial advisor thinks they’re a rip-off or they’re a bad idea, please, please, please have them call me. I’d love talking to financial advisors and other professionals about reverse mortgages and all the applications that are available and how it can provide so much more flexibility for people. The other thing, number 12, pay for long-term care needs or Long-term care insurance premiums. You know those insurance premiums get larger and larger as you get older and older. And you may never need it. Hopefully you never do. But if you do, you’ve got to keep paying it, right? But you can pay for those long-term care insurance premiums with a reverse mortgage or use a reverse mortgage if you didn’t get long-term care. Keep it in reserve for those emergency needs. Number 13, fill the gap in a retirement plan caused by lower than expected returns on your assets. So let’s say you didn’t earn as much as you wanted to in your first few years of retirement, and now your financial advisor says, oh, you’re going to have to cut back, especially with this inflation. You’ve been taking out more than you should. A reverse mortgage might be a great option for you to supplement that income for you. Number 14, pay for short-term in-home care or physical therapy following an accident or medical episode. If you had some issue and you’ve got medical expenses that are not covered, a reverse mortgage, again, this is where the line of credit is so flexible. And you can convert it. Let’s say you might only need an extra $2,000 for a year to help cover some medical costs while you’re going through physical therapy. You could set that up and just get that money deposited in your bank account every month. The other thing too, a lot of people do not have any kind of a retirement plan or will or an estate plan. You need to pay somebody, a real professional. Don’t talk to your brother-in-law that’s studying prepaid legal or something like that. Not that that’s a bad thing, but you want to get somebody that really knows what they’re talking about. And these people are not cheap and they’re worth it. They’re worth every penny. Use a reverse mortgage to pay for that. Number 16, convert a room or basement into a living facility for an aging parent or a relative or a caregiver for you. That would be nice to have available. So you’ve got some place for an in-home care person to stay to help take care of you so you can stay in your home. Number 17, you can pay for an Uber or Lyft account so you can have mobility and access to appointments and social activities. Now, I know there’s those buses that will come around and carry you around to the senior center and things, but you don’t always want to just go to a senior center or you don’t want to just… have that minimum thing. You might want to have some more flexibility, have them take you to your volunteer meeting with Rotary or Kiwanis, like we talked about a couple of weeks ago, or to a volunteer event. That would be a great way to do it. And you can’t always rely on friends. A lot of times you can, but having an Uber or Lyft account or some other kind of transportation that you can pay for is a fantastic way. create a set-aside to pay for real estate taxes and property insurance. Remember, that’s still your responsibility. So you’ve got to keep doing that, and it’s nice to know that you’ve got that money set aside to do that. Delay collecting Social Security benefit until it maxes out at age 70. This is something I’ve had some customers do, but with professional help. Talk to your financial planner about it. You retire at 65. You could take Social Security, but you don’t really want to that early. You want to put it off because you know you’re going to get 8% per year more if you can wait till you’re 70. And so you set up a term payment plan for five years where you get $3,000 a month or whatever it might be for five years. And at the end of the five years, that payment stops, but Social Security kicks in. No change in lifestyle. Number 20, eliminate debt, especially, especially, especially credit card debt. That will kill a financial plan, having too much credit card debt. Consolidate your debts, eliminate that debt. Now, granted, you still have debt with reverse mortgage, but you don’t have a payment. That’s a huge difference. And also, the interest rate’s a lot lower than it is on a credit card or an existing home equity loan. Pay that thing off and get a reverse mortgage. You can also use it to cover expenses between jobs or during the career transition or even for training for yourself for a new job. If you get laid off from a certain job and you need to have a one-year training process, so you’re 63 years old and you know you’ve got a long time you can still work and you want to be productive, use it for that. Cover expenses to avoid capital gains consequences of selling other assets. That’s huge. When you sell assets and you’ve got capital gains, you sell a rental property. Now you’ve got to pay all these capital gains, and maybe you didn’t make as much on that rental property as you thought you would. purchase health-related technology that allows you to stay in your home, like smart watches, a Lyft, like we said, a Lifeline, a life alert thing where if you fall or what have you, hearing aids even. Help your adult children through family emergencies. That is such a peace of mind to be able to offer that kind of help to your family when tragedy strikes. convert a standard IRA to a Roth and use reverse mortgage proceeds to pay the taxes. That can be super beneficial. You can make so much more and not have to worry about paying taxes on it if you’re going to keep it invested for the next 5, 10, 15 plus years. Then you don’t have to worry about that paying taxes on the whole amount. You’re only paying taxes on the amount that you converted over and you’re using reverse mortgage proceeds to do it. Okay, that was a very quick rundown of 25 different ways you can use a reverse mortgage in 2025. If any of those things struck a chord, remember, we just scratched the surface of all of these. I should make a plan and dig into each one of these throughout the year. That might be a good idea, or certain ones anyway. But give me a call with any questions at 303-467-7821. My name is Bruce Simmons. I’m the reverse mortgage manager with American Liberty Mortgage, 303-467-7821. Or visit me online at reversemortgageradio.net. Remember, you can go there and download my free consumer guide that has a lot of great information. Actually, most questions you have can be answered from that guide. I look forward to talking to you sometime throughout the year. Please call me at 303-467-7821. Hope you had a great New Year’s and I’m looking forward to talking to you at some point.
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Call Bruce Simmons today. Ask about his free Colorado Consumer Guide, 303-467-7821 or ReverseMortgageRadio.net. Bruce will come to you anywhere across the front range to make sure you understand how reverse mortgages work. Regulated by DORA, NMLS number 409914. American Liberty Mortgage is an equal housing lender.
