Join Bruce Simmons, reverse mortgage manager at American Liberty Mortgage, as he delves into the world of reverse mortgages on this enlightening episode. With over 21 years of experience, Bruce shares his insights on why these financial tools are not just for the desperate or cash-strapped. Discover how reverse mortgages can offer peace of mind, financial relief, and security for seniors looking to make the most of their retirement years. Bruce discusses common misconceptions about reverse mortgages and clarifies who the ideal candidates are. Are you still working at 62 or have a substantial amount left on your mortgage?
00:24:30 Financial Planning with Reverse Mortgages
SPEAKER 01 :
Hello, and welcome to another episode of your favorite reverse mortgage program, Reverse Mortgage Radio. Thanks for joining the show today. Do you know I’ve been doing this show for seven years now? I started in 2017 on AM560 KLZ, and then at the beginning of this year, I moved to Legends. So I love this show and I love doing this show. I love talking to all the listeners who call in every day. I get a lot of calls from this show. And please feel free to call me with any questions at all about reverse mortgages. You can reach me directly at 303-467-7821. That is my direct line. It rings right to my phone in my office that actually is in my house. I don’t work from home very often. I’m usually out seeing people or I’m in our office in Denver because I work for a company. I’m actually an employee of another company called American Liberty Mortgage Incorporated. And we’ve been in Denver for 21 years. And we’ve been actually in business for 21 years, which coincidentally is is the same amount of time that I’ve been specializing in reverse mortgages. But either way, feel free to give me a call. My name is Bruce Simmons. I’m the reverse mortgage manager for American Liberty Mortgage here in Denver at 303-467-7821. Before we jump into the show today, I do want to highlight something because today, June 15th, is National Elder Abuse Awareness Day. I know that’s not a very positive topic, but unfortunately, things like that happen to people. As you get older, you become more susceptible to different kinds of abuse, whether it’s physical or mental or financial. In fact, financial abuse or financial fraud, too, are most often committed by family members. Keep that in mind too. And if you have an older person in your life, reach out to them because loneliness is a huge, huge factor for people as they age, especially if their kids are out of state or their family is not around or they don’t have any other family. A lot of people just don’t have any other family. And when they stop being able to be active in the community, whether it’s volunteering or just hanging out at the local pub, it creates a loneliness. And it’s nice to hear from people. Let them know that you care, that, hey, you’re thinking of them. Take them to breakfast now and again, whatever the case may be. I’ve got a customer of mine. I think I did his first loan in 2015. And we’ve been going out to breakfast for the last couple of years. About once a month, we meet for breakfast. In fact, I was gone part of the month last month. And so I need to give him a call because he’s struggling with some health issues now. He’s getting up. He’s 82 and getting a little older. So I’ve got to reach out to him. Mental note. Keep that in mind. But just reach out to people and don’t be afraid to say something. If you do see something that maybe you’re worried about, you can go to National Center on Elder Abuse. N-C-E-A for National Center on Elder Abuse dot A-C-L for Alpha Charlie Lima dot gov. So ncea.acl.gov. Or go to Colorado Department of Human Services. That’s cdhs.colorado.gov. And there’s a big yellow stripe underneath the header there on the website that says Adult Protective Services. And you can click on that link and you can get phone numbers to different counties worldwide. where you can call and report any kind of abuse that maybe you witness or if somebody needs help too. Definitely, it’s Adult Protective Services. Okay, let’s jump into the show. A lot of times people will ask me, who’s an ideal candidate for you? Or am I a good candidate? for a reverse mortgage. And that’s always kind of a challenge for me to tell somebody, yeah, you are a good candidate because it really depends. But some of the things that have prohibited people from even researching reverse mortgages is because financial advisors or family members, they think that reverse mortgage is… What it’s not, something is things that it’s not. And I’ve talked about this before. The biggest one is people, too many people think that reverse mortgages are for desperate people. Some phrases that inaccurately describe the model application, when somebody says, okay, well, if you’re older, if you’re cash-strapped or desperate, then you’re a good candidate for a reverse mortgage. If it’s your last resort, or if you’re house-rich and cash-poor. Now, these come from a book, by the way, too, that I highly recommend. by Dan Holtquist called Understanding Reverse. And I highly recommend you get it. It’s a great book. It’s available on Amazon or just go to understandingreverse.com and you can order the book there yourself. Dan does a great job. He works for a different company, but he helps the industry through these books. But it’s not just for desperate people or people that are house rich and cash poor or who’ve exhausted all other resources. That is not who the ideal candidate is. I mean, I help people in those situations sometimes. But like just for example, earlier this week, I got a call from somebody who said, I’m in foreclosure. I just found out they’re foreclosing on my house. I’ve been in and out of this house since I was two years old, he said. He’s now 64. And he’s unemployed. He barely makes any money. He doesn’t make enough money to pay his mortgage, obviously. And I cannot help him because he owes more on the home that I can loan. Unfortunately, I told him, you’ve got to sell. There’s no other recourse, really, than to just sell. Now, maybe, and I’m just now thinking of this, I need to call him back now. it’s possible that there are, there might be like an equity sharing company that would allow him to stay in the house and they take a lot of the equity. I don’t know how those work though. And I can’t explain it to him because I’m a reverse mortgage specialist. That’s all I do. And that’s all I’ve been doing for 21 years is reverse mortgages in my job. Anyway, I do other things outside of the job, but sometimes my wife doesn’t think so. But anyways, it’s, Here’s a few possibilities of things that you wouldn’t normally think about people that would want a reverse mortgage or be an ideal candidate for a reverse mortgage. So somebody that’s 62, somebody that’s still working. Wait a minute. Still working. Why would you get a reverse mortgage if you’re still working? Let’s talk about it here in a minute. Also, too, people who have maybe between 5 and 10 years left on their existing mortgages on their home. Now, we can help people who just refinanced in the 21-20 refi boom. The problem with that is, let’s say you’re 65 years old or 62 years old and you just refinanced four years ago. Now, you’ve still got 25 years left on your home. Well, you’re going to be paying a mortgage payment until you’re 80 or 85 years old. Do you really want to do that? So even though you may not have a short amount of time left to pay off your mortgage, it could still benefit you. We’ll talk about that in more detail. And this is something that you may not think of either. Somebody that really hopes that they’re never going to need the funds. Let’s talk about those situations. And again, these are mostly from the book Understanding Reverse Mortgage by Dan Holtquist. Okay. So first of all, the ideal candidate for somebody, let’s say they’re age 62. They call me, we can’t loan 50, 60, or 70% of the value on reverse mortgages, especially to somebody that’s only 62. You need to be about 85 years old to get half of the value of your home on a reverse mortgage now. Why would somebody 62 want to start this process? Well, if you’re living in your home and you know this is going to be your retirement home or you’re 99% sure you’re not intending on moving anytime soon, well, the earlier you can start the reverse mortgage, the better because you’ve got this line of credit. Let’s say you only owe $100,000 on your mortgage and we can loan you $200,000 on a reverse mortgage. Well, you take the first hundred and pay off your existing loan, which is a great way. So now you’re saving money and you don’t have to make that principal and interest mortgage payment because no payment is required on a reverse mortgage. However, you do have to continue to live in the home as your primary residence. You have to… pay your property taxes, pay your own homeowner’s insurance, and HOA dues, things of that nature. You have to maintain it and keep your name on title. As long as you do those five things, though, you can never, ever, ever be required to make a payment. Or you can never be kicked out of the home either, as long as either you or your spouse are living there. But in this case, we use the first $100,000 to pay off the mortgage that you have. Now maybe you’re saving… $1,000 a month or $1,200 a month in principal and interest. That’s a pretty sweet deal. Now you’ve got that extra cash in your pocket. Or you can, if you choose to, apply that towards the loan balance while you’re working. Let’s say you are still working. Again, you’re still working. You’re going to be working for another five years, say. You’re planning on retiring at 67. You’re only 62 now. This is a perfect scenario for people. You can make the mortgage payment for the next five years to pay down your loan balance. So now your loan balance goes from $100,000 say to $70,000. That $30,000 you pay over the next five years is going to be added to the line of credit. So you’ll have this extra money added. that’s available, that’s growing. That’s a benefit of starting out early is the line of credit grows over time. You’re not earning interest. It’s not like you’re investing it in a CD and you’re earning interest or anything like that. We’re just increasing the amount of equity you could borrow at a later date. So let’s say 20 years down the road, you’re now 82 and you need in-home care. Now, instead of having just $100,000 in your line of credit, plus whatever the growth is, you start out with $130,000. And so you might end up 20 years down the road having a whole lot more money. Maybe it’s $250,000 or $300,000 in your line of credit. There’s a lot of benefits to starting the reverse mortgage earlier. instead of later in life. Now, granted, if you’re 85 years old and you need a reverse mortgage now, you can do it, okay? We’re not going to turn you down, but it just makes sense to start earlier. And that’s kind of counterintuitive for a lot of people’s thought process when you’re thinking about it. Like, oh, well, I don’t need it now. I’m working, I’m making a good salary. I don’t need to do a reverse mortgage now. Well, if you did it now, there’s a lot of benefits to to doing it now and having it in place. Plus then if an emergency happens, what if you get laid off? I mean, that happened to a lot of people in 2020 that were not intending on being laid off. They intended on working a number of years more, but then after COVID, they couldn’t work. They got laid off and they couldn’t find a job afterwards. So things like that. Or if you have a stroke or an illness or if a family member has an illness and now you have to take care of them or you need access to money, you need to remodel your home so that you can live in it. There’s all kinds of different reasons why you might want to do this now. And having a HELOC, a traditional home equity line of credit, may not be in your best interest. By the way, if you just tuned in, you are listening to Reverse Mortgage Radio. My name is Bruce Simmons. I’m the Reverse Mortgage Manager for American Liberty Mortgage. You can reach me directly if you have any questions about reverse mortgages at 303-467-7821. You can also visit me online at reversemortgageradio.net. ReverseMortgageRadio.net. That’s my website. You can go there in the upper right-hand corner, click on Reverse Mortgage Radio Shows, and you can listen to the podcast. It’ll be up next week. But we’re talking about who an ideal candidate is, and it’s kind of counterintuitive as to who you might think of. So somebody that’s 62 is a good candidate, maybe ideal, depending upon your situation. It’s not ideal if you’re 62 and you’re planning on moving, I mean. So like, for example, me, I’m 59. I’m not 62 yet, but I plan to move. at some point in the next probably five, six, seven years. And whether I’m retired or not, I’m going to move. I’m in a multi-level home that backs up to a busy street. I love to garden and all these trees in my neighborhood got way too big and I’ve got way too much shade in my yard now for gardening. Although I still do it, it’s just not as good as it used to be. Although it’s good because it’s not quite as much sun and I’ve been battling some skin cancer things. That’s good from my wife’s perspective, but it’s not good for my garden to do that. So I plan to move someplace that has a big lot with a lot of open space and all on one level to someplace where we can stay for the foreseeable future. So I’m not a good candidate for a reverse mortgage. Even if I’m still living in the same home when I am 62, I won’t be doing a reverse mortgage. But when I move, I’m going to be doing a reverse mortgage for purchase. And I’ve talked about that before. I probably should touch on it again. And I plan to overfund my reverse mortgage. So in other words, if I sell my home and I cash out $600,000 and then I go get a new $700,000 home or $800,000 home, whatever. And let’s say I can get 300 from a reverse mortgage and I really only need 200. Well, I’m going to only take the 200 and leave 100,000 in a line of credit. If you’re interested in that type of scenario, please call me. I’d love to talk with you about it. I think it’s a great strategy. That’s my intent to do that. But I’ll still be working probably too. And I plan to do a reverse mortgage while I’m working. because I think it makes sense. And then I will be paying the loan down to build up my line of credit. I’m looking at a financial or a reverse mortgage as a financial planning tool. I’m talking to a financial advisor about it, about I’m setting up a financial plan with a financial advisor and my wife and all that. And that’s my goal, to use a reverse mortgage to help supplement improve my financial standing if you will uh when i’m retired okay so that’s still working in age 62 now like i said before i touched on this somebody who has just five to ten years left on their existing mortgages is a good candidate because you’ve got a lot of equity in the home most likely And you still have time to pay on the house. You know, you’re saving money by getting rid of that mortgage for the next five to 10 years. But it’s not just that’s not really the only way. If you’ve got 20 years left on your mortgage, I think that’s makes even more sense because you don’t want to be paying on a mortgage when you’re 80 years old. And if you are 80 years old and you’re listening to this and you’re paying a mortgage, please call me because I’d love to talk with you and possibly hopefully be able to loan you enough to pay off. that existing mortgage and get you out from under the burden of that payment. But keep in mind too, let me touch on this because I haven’t talked about what a reverse mortgage is. And a lot of times I like to open up the show with what a reverse mortgage is. A reverse mortgage most of the time is an FHA insured loan that is specifically designed for people that are 62 and over. It allows you to convert a portion of the value of your home not the equity, but the value of your home in the money that you can use without ever having to be required to pay it back. No mandatory monthly payments. However, the house is still in your name, so you must pay your property taxes, pay your homeowner’s insurance, keep the property maintained. You have to live there as your primary residence and keep your name on title. And as long as you do those five things, no monthly payment is required. However, of course, like I emphasize over and over again, you certainly are able to make payments if you want to. If you do make payments or you come into a lump sum and you want to pay it off and keep the line of credit, you don’t. You can’t. The line of credit, everything will be closed out if you pay the loan off in full. This is not like a HELOC, a traditional home equity line of credit you get at your bank where you can keep a zero balance. The reverse mortgage requires you to have some balance. You can pay the loan down to like $300 or $400 or $500, but do not pay it off if you want to keep the line of credit intact. All right? Keep that in mind. So there’s benefits if you only have a few years left on your mortgage. There’s benefits if you’ve got a long time left on your mortgage. And there’s a lot of benefits. You’ve got a lot of flexibility if there is no mortgage at all. A lot of people would tell me, well, I don’t have a mortgage for you to reverse. Well, okay. The nice thing about reverse mortgages is that they work in all different kinds of scenarios. So if you own your home free and clear, there’s four different ways you can take money from a reverse mortgage. You can take it as a lump sum. Now, there’s restrictions on that, and we could talk about that at some other point. But you can also set up a line of credit to treat it so you can use it like a HELOC, a home equity line of credit. You can also receive monthly payments where we deposit money every month into your bank account. And you can set that up a couple of different ways. We can guarantee you a monthly payment as long as you live in your home, you or your spouse live in your home. no matter what. Now, that may only be $700 a month, and you may say, hey, Bruce, I need $2,000 a month. Well, in that case, we can set up a monthly payment over what’s called a term period. So let’s say you’ve got a certain amount of money available after paying off a mortgage, or you own your home free and clear, and so you’ve got X number of dollars available. We can say, okay, we’re going to loan you this. We can pay you $2,000 a month, but it might only last for the next, say, 12 and a half years or 18 years. And it’s not guaranteed to last as long as you live in your home. So you can do a lump sum, a line of credit, a monthly payment, or any combination. You can set, I’ve done loans for people. They take out 20 or 30 or $40,000. We set them up on $1,000 a month payment, and there’s still maybe 20, 30, 40, $50,000 left over in a line of credit. that they keep for emergencies. It just depends on the value of your home and how much you owe on the home as to what we can loan. And I can run numbers for you a number of different ways. I’m doing that for somebody right now, actually. I got to do it over this weekend. So those are a few different things. Now, lastly, I want to talk about kind of the unconventional way of looking at a reverse mortgage is for somebody who may never need the money. but they like the security of having it available. Most people that I do reverse mortgages for, we pay off the existing mortgage and there’s maybe 20, 30, 40, 100,000 or even $150,000 left over. They’re not required to take that money out. So we set it aside in a line of credit. And most people look at that line of credit and they say, I’m never touching that. My goal is to never touch that as long as I live in the home. But it’s really nice to know that it’s there, that peace of mind. I tell everybody the goal, the main goal of a reverse mortgage is to relieve financial stress. If you don’t have much of a reserve at all, you’re living paycheck to paycheck with maybe a few thousand dollars, or even if you’ve got 10 or 20 or 50,000 in a line of credit or a savings account, that’s not nearly enough. If you know, hey, property taxes are going up a whole lot faster than my Social Security, homeowners insurance is through the roof, groceries, medicine, gas, whatever. It’s a lot more expensive now than it was just five years ago. And probably five years from now, it’s going to be a whole lot more expensive than it is today. But your Social Security, or if you’re on a pension that’s fixed, that’s not going up. What are you gonna do? You’ve gotta have some kind of backup plan. Now, hopefully you never have to use it, but I’ll never forget a loan I did for a retired financial advisor who had, he has $7 million in assets and a free and clear million and a half dollar home. And he set this up. He said, this reverse mortgage is my nuclear option. That’s what he said. Just in case everything else blows up, I’ve still got this reverse mortgage because it’s guaranteed by FHA too. So as long as there’s a federal government in place, which hopefully there will. I think we’ve got too big of a federal government right now, but I wouldn’t mind it shrinking by half or two-thirds or three-quarters even. But as long as we have a federal government, this loan and that money that’s set aside in the line of credit for you is 100% guaranteed by FHA. If the servicing company or the lender that has your loan goes out of business, that money is still going to be available to you through FHA. If they get hit by a tornado or a hurricane and they can’t get you the money, you need $10,000 today because your furnace just blew up and The company got hit by a tornado and they’re out of commission for the next 60 days. HUD steps in, the Department of Housing and Urban Development, they’ll step in and they’ll send you that $10,000. So it’s 100% guaranteed. That’s one of the reasons there’s mortgage insurance on reverse mortgages. That’s part of what the mortgage insurance protects. The other part it protects is that, remember I said there’s no mortgage payment required, no principal and interest payment required on a reverse mortgage. You’re still charged interest every month, though. So that interest gets added to your loan balance. It’s called negative amortization. the loan balance gets larger every month. And I’m very clear with people to explaining that because I want to make sure that you understand your loan balance gets bigger and bigger and bigger five years from now, 10 years from now. I give you an estimated amortization schedule so you can see what the loan balance might look like, depending on how you use the money, depending on what happens to the interest rate, depending on what happens to the value of the home. All these factors, we don’t know what’s going to happen next year, let alone 5 or 10 or 20 years down the road. But we can project. That’ll probably be wrong, but it’ll give us an idea. So that way you can see how the loan balance grows. Now, odds are the property value is going to grow as well. And if we’re only loaning you 40% of the value today, so you’ve got a $500,000 home and we loan you $200,000 today, You know, 20 years from now, that $200,000 that you borrow today might be $450,000 or $500,000, depending on the interest rate, right? But your $500,000 home 20 years from now is probably going to be a million or more. So, you know, at that point then, you pass away, your heirs inherit the home. They sell the million-dollar home, pay off the $400,000 or $500,000 loan balance, and they inherit the difference. Or they could keep the house and just refinance the reverse mortgage. And they’ve got a certain amount of time to do that. And now what led me down this little rabbit hole is that if, let’s say your loan balance does grow to $500,000, but the value of your home doesn’t grow to a million. In fact, it drops. just before you pass away. Now it’s only worth 400,000, but you owe 500 on the reverse mortgage. The mortgage insurance will cover the difference, so the lender is not going to lose any money. Since the lender is not going to lose any money, they’re not coming after you, your estate, or your heirs. Again, peace of mind is what this loan is intended to provide for you. Please feel free to call me if you have any questions about reverse mortgages. No matter what your situation is, we can talk about it. Even if you don’t qualify today, Let’s say I can only loan you, you owe $200,000 and I can only do a loan for $150,000 today. So you don’t qualify. I can’t loan you enough to pay off your existing mortgage. And we have to be able to pay off any existing loan on the home. You don’t have $50,000 to bring to the closing to make up the difference, the shortfall. So I can’t do the loan for you right now. That doesn’t mean we can’t do it now. next year or two years or three years down the road possibly what if you the value of your home increases dramatically if interest rates drop and i don’t know i’m i’m kind of pessimistic on interest rates but if they do come down next year and substantially they would need to come down pretty substantially to really make a dent in the loan to value that we can loan but every every little bit helps so now maybe two years from now we can loan you enough to pay off your existing mortgage And you can have the reverse mortgage. So I don’t mind talking to you today about a loan that you might not do for two, three, four, five years down the road. Feel free to call me. My name is Bruce Simmons. My number is 303-467-7821. 303-467-7821. Or visit me online at reversemortgageradio.net. Hopefully you enjoyed the show and I look forward to talking with you. Thank you.
