How Do Rising Interest Rates Affect Reverse Mortgages?

If you had a reverse mortgage today and kept some of the money in a line of credit (LOC), the growth rate for these funds will also change along with any rate change.

Last month the Federal Reserve raised the federal funds rate for the third time in just over a year. There is talk among some economists that they will
raise it another two to three more times in 2017.

While the federal funds rate doesn’t have a direct impact on reverse mortgage rates, they tend to follow suit. Reverse mortgages use the London Interbank
Offered Rate (LIBOR) as the index. What this means is that as the index increases or decreases, the rate you are charged on your reverse mortgage will
go up or down.

If you had a reverse mortgage today, and kept some of the money in a line of credit (LOC), which is an option with this loan, the growth rate for these
funds will also change along with any rate change. If you happen to have a lot of money in your reverse mortgage LOC, increasing interest rates can
have a very positive impact on how quickly it grows.

Here is how it works: When you take out a reverse mortgage, the amount available is determined by the age of the youngest borrower, the value of the home
and the interest rate. The lender has to make all of this money available to you, but you do NOT have to take it all.

If the lender tells you that you have $200,000 available, but you only need $80,000, that leaves $120,000 left over that you don’t need and don’t want
to be charged interest on. You can choose to leave that extra money in the form of a line of credit. This LOC comes with a growth rate.

For example, if the interest rate that you are charged on the $80,000 you take out is 4.25%, the rate of growth on the unused line of credit is 1.25% greater,
or 5.50%. This means that if you left that $120,000 in the line of credit without drawing any out, in 12 months, it would grow to over $127,000.

Please remember that this growth in the LOC is not free money, nor is it interest that you have to pay taxes on. It simply is increasing the amount that
you can borrow in the future. The longer you keep the money in the LOC without using it, the larger the amount will grow.

This program works great for people who may not need a reverse mortgage now, but think they might in the future. Get the loan in place now while the values
are high and the interest rates are low. If the rates continue to increase, you will benefit with a larger LOC when you need it.

Having said this, the best way to take advantage of this is to get the loan in place before the rates increase too much. Interest rate increases
can have a very negative effect on people who want to get a reverse mortgage but haven’t yet.

As interest rates increase, the amount that you qualify to receive from the reverse mortgage goes down.

I want to keep this as simple as possible. If you wait to get your reverse mortgage in place and the interest rates increase by even just one percent higher
than they are now, instead of qualifying for $200,000, as in the scenario earlier, you would only qualify to receive $176,000.

After you take the $80,000, that would only leave you with a line of credit of $96,000.

An interest rate increase of just one percent, all other things being equal, would cost you $24,000. Odds are, that if you wait one year and rates increase,
any additional increase in the value of your home and age, will not offset even a small increase in the interest rate.

Here’s another way to think about it, without even considering the line of credit. Let’s say you qualify today to receive $200,000 from a reverse mortgage
and you have a current loan against your home for $185,0000. If you get the reverse mortgage today, you can pay off this loan against the home and
still have $15,000 left over.

If you wait, and the interest rate increases by just one percent, you would only qualify for $176,000 which isn’t even enough to pay off the loan against
the home. You would either have to pay the $9,000 difference or not be able to get the reverse mortgage at all.

This is why, without trying to scare anyone, I think it is much better to learn the facts and figure out if a reverse mortgage is right for you sooner
rather than later.

I don’t know if interest rates will continue to increase or not. The stock market could crash tomorrow and the Federal Reserve could panic and lower the
rates all over again.

My gut tells me this is not going to happen anytime soon, but there is a reason I don’t have a lot of money in the stock market. I don’t understand it.

What I do understand is reverse mortgages and I answer questions from people every day about how they work. Some decide to go with it and some don’t. I’d
be happy to talk with you as well.

Please feel free to call me with any questions at 303-467-7821.

Bruce Simmons

Bruce Simmons

I absolutely love what I do - working with senior homeowners to help them live a more comfortable, flexible and secure retirement. I have the absolute best customers in the world, and even though I worked in the forward mortgage business for a number of years, I could never go back to doing conventional loans. I'm a 100% reverse mortgage specialist.

5.0

I met Bruce from a referral who just love what he did for them on their Reverse Mortgage, So I contacted Bruce and told him my story and he came up with a great Reverse Mortgage for me and my needs and now I am living good and not worrying about Finances anymore. He had it done in a timely manner. If you are looking for the MAN to help you get the best Reverse Mortgage you need to call him and hope you let him help you.

Bruce is one of the most professional, knowledgeable and efficient experts I have worked ŵith ever in any field. He is fast to answer and always ready to help...and he's a great guy!

I was hesitate about getting a reverse mortgage until Bruce Simons put my mind at rest. He is easy to work with, extremely knowledgeable and efficient. Things get done and he will make sure that you understand every part of the process. I interviewed several other people and he was hands down.....The only choice.

Doing a Reverse Mortgage is a major decision, when working with Bruce he came out personally to go over every thing in detail, there was no pressure to finalize the transaction, I had even put the loan on hold for awhile even though I had locked in my rate, I had called Bruce off and on for a few weeks to ask questions that I had concerns about and he was always available to talk to me. In the end it gave me time to feel comfortable about my decision to move forward with the Reverse. Bruce was very pleasant to work with and would certainly recommend Bruce if you are going to consider a Reverse Mortgage.

Bruce Simmons at American Liberty is one of the best in the reverse mortgage industry. I have known and worked with him for years and he always does a great job. You are in good hands with Bruce and know that he will take good care of you or your loved ones every step of the way.

Best thing I ever did! Bruce Simmons at American Liberty Mortgage is the best. He is always there to answer your questions, and can easily explain the whole idea of a Reverse Mortgage. He takes the time and goes through the entire process with you. It worked out so well for me. Thank You Bruce!

We had researched Reverse Mortgages for 5 years and after hearing about Bruce Simmons and meeting with him, we finally decided to move forward with the Reverse Morgage. It has been over a year now and we are still very pleased with our decision. We think Bruce is very professional, knowledgeable and honest. Thank you, Bruce, for all your help.

I first met Bruce Simmons 2017. I found him on the internet. I was looking for someone local. I called him and explained I was only looking into doing a reverse mortgage, so I did not want him to think this was something I was ready to do. Bruce was friendly, very open about the basics of a reverse mortgage. Bruce came to my home and presented the figures and other details that he could offer. The first thing that impressed me was this was not a hard sell, more of a informational meeting. He was very open about all of the details, and answered my questions without hesitation. What really was evident was he was establishing a relationship with me, and I realized he knew I would not take the loan at that time. There was not enough equity in my home, and I would have to bring money to the table. Although I was not ready to do a loan, Bruce assured me he is always available for questions. Four years later, I finally did do a reverse mortgage, and I couldn't be happier with having done it. I have done away with a mortgage payment which allows me to fund my retirement account with that mortgage payment. We did some much needed landscaping with our cash out transaction, and will move on to improvements inside of the house. My reverse mortgage has a line of credit, and I feel sense security knowing it is there if I need it. Bruce explained that a reverse mortgage is not for everyone, but I feel certain that he paved the way for a strategy that worked for me. I will definitely do a refinance when the time is right. I will check in with Bruce to be sure what the benefits are when I do it again.

I have worked with Bruce Simmons for 15 years. Bruce is one of the best in the industry. He is extremely knowledgeable, kinds and detailed in what he does. His clients love working with him and trust him to help them with their Reverse Mortgage loans. I would recommend Bruce to anyone I know that is thinking about or wanting to do a Reverse Mortgage. He will always take very good care of the customers and make sure their needs are met! Class act and one of the best in the industry by far!

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John Wickersham
John Wickersham

Just left us a 5 star review

google
John Wickersham
December 22, 2022

I met Bruce from a referral who just love what he did for them on their Reverse Mortgage, So I contacted Bruce and told him my story and he came up with a great Reverse Mortgage for me and my needs and now I am living good and not worrying about Finances anymore. He had it done in a timely manner. If you are looking for the MAN to help you get the best Reverse Mortgage you need to call him and hope you let him help you.

google
Tim Mallory
November 11, 2022

Bruce is one of the most professional, knowledgeable and efficient experts I have worked ŵith ever in any field. He is fast to answer and always ready to help...and he's a great guy!

google
Kathleen Mitchell
September 18, 2022

I was hesitate about getting a reverse mortgage until Bruce Simons put my mind at rest. He is easy to work with, extremely knowledgeable and efficient. Things get done and he will make sure that you understand every part of the process. I interviewed several other people and he was hands down.....The only choice.

google
Mike Hoeffner
August 30, 2022

Doing a Reverse Mortgage is a major decision, when working with Bruce he came out personally to go over every thing in detail, there was no pressure to finalize the transaction, I had even put the loan on hold for awhile even though I had locked in my rate, I had called Bruce off and on for a few weeks to ask questions that I had concerns about and he was always available to talk to me. In the end it gave me time to feel comfortable about my decision to move forward with the Reverse. Bruce was very pleasant to work with and would certainly recommend Bruce if you are going to consider a Reverse Mortgage.

google
Jonathan Maiolatesi
August 22, 2022

Bruce Simmons at American Liberty is one of the best in the reverse mortgage industry. I have known and worked with him for years and he always does a great job. You are in good hands with Bruce and know that he will take good care of you or your loved ones every step of the way.

google
Ronda Giblin
August 20, 2022

Best thing I ever did! Bruce Simmons at American Liberty Mortgage is the best. He is always there to answer your questions, and can easily explain the whole idea of a Reverse Mortgage. He takes the time and goes through the entire process with you. It worked out so well for me. Thank You Bruce!

google
John Bell
August 20, 2022

We had researched Reverse Mortgages for 5 years and after hearing about Bruce Simmons and meeting with him, we finally decided to move forward with the Reverse Morgage. It has been over a year now and we are still very pleased with our decision. We think Bruce is very professional, knowledgeable and honest. Thank you, Bruce, for all your help.

google
Mary Bernard
August 19, 2022

I first met Bruce Simmons 2017. I found him on the internet. I was looking for someone local. I called him and explained I was only looking into doing a reverse mortgage, so I did not want him to think this was something I was ready to do. Bruce was friendly, very open about the basics of a reverse mortgage. Bruce came to my home and presented the figures and other details that he could offer. The first thing that impressed me was this was not a hard sell, more of a informational meeting. He was very open about all of the details, and answered my questions without hesitation. What really was evident was he was establishing a relationship with me, and I realized he knew I would not take the loan at that time. There was not enough equity in my home, and I would have to bring money to the table. Although I was not ready to do a loan, Bruce assured me he is always available for questions. Four years later, I finally did do a reverse mortgage, and I couldn't be happier with having done it. I have done away with a mortgage payment which allows me to fund my retirement account with that mortgage payment. We did some much needed landscaping with our cash out transaction, and will move on to improvements inside of the house. My reverse mortgage has a line of credit, and I feel sense security knowing it is there if I need it. Bruce explained that a reverse mortgage is not for everyone, but I feel certain that he paved the way for a strategy that worked for me. I will definitely do a refinance when the time is right. I will check in with Bruce to be sure what the benefits are when I do it again.

google
LESLIE HINES
August 19, 2022

I have worked with Bruce Simmons for 15 years. Bruce is one of the best in the industry. He is extremely knowledgeable, kinds and detailed in what he does. His clients love working with him and trust him to help them with their Reverse Mortgage loans. I would recommend Bruce to anyone I know that is thinking about or wanting to do a Reverse Mortgage. He will always take very good care of the customers and make sure their needs are met! Class act and one of the best in the industry by far!