KLZ’s Ask the Experts proudly introduces Reverse Mortgage Radio hosted by local reverse mortgage specialist Bruce Simmons. For 15 years, Bruce has delivered homeowners from across the Front Range from costly monthly mortgage payments, relieving financial stress while providing additional income for retirement. Bruce wants you to learn the truth about reverse mortgages so you can make an informed decision for your retirement years. This is Reverse Mortgage Radio.
Hello and welcome to Reverse Mortgage Radio. Today, we’re gonna be talking … hopefully, we have enough time to talk about two different articles that came out recently earlier this week. But before … I should say earlier this month.
But before we get into those too much, I do wanna remind you next week, the week of April 23rd, the National Reverse Mortgage Lenders Association is hosting a series of free online educational sessions for older homeowners and professionals who serve them. If you happen to be a financial advisor or a real estate agent and you help out baby boomers and people who are retired, you need to be aware of this. You can find all the details at reversemortgage.org. Reversemortgage.org. That’s the National Reverse Mortgage Lenders Association website. But I also have a blog on my website … it should be up now, I think it’s up now. I sent it to my web guy yesterday, but it’s all about the reverse mortgage and each day, Monday, Tuesday, Wednesday and Thursday, they’ve got different seminars that you could attend.
On Tuesday, I know I don’t remember what’s going on on Monday, but Tuesday they have the home equity conversion mortgage for purchase. If you’re a real estate agent or you’re a homeowner and you’re thinking you might wanna downsize or rightsize, downsize and upgrade, whatever the case may be, and you might wanna use a reverse mortgage for that, you need to be on this call. And again, it’s Tuesday, April 24th, that’s at 11:00 o’clock our time here and then a couple hours later at 1 o’clock our time, there’s another one, a question and answer session on using home equity to support aging in place. Maybe you don’t wanna move. Maybe you wanna stay where you’re at and find out how a reverse mortgage can help you with that.
Wednesday they talk about managing the cost of in-home care. They have a couple seminars on Wednesday for that.
On Thursday, it’s for financial advisors or their clients. If you have money set aside and you’re concerned about how long that might last and you wanna see how a reverse mortgage might be able to help you extend the life of your portfolio, you and your financial advisor need to be on this call on Thursday. And that’s gonna be I think at 2 o’clock next Thursday.
All the information is on my website. It’s on the blog section at reversemortgageradio.net. Reversemortgageradio.net. You can also go to NRMLA’s website, which is the National Reverse Mortgage Lenders Association. That’s just reversemortgage.org.
Reversemortgage.org. I’ll mention that again when we’re near the end of the show, but definitely check it out.
And by the way, too, if you have any questions, you can also call me directly at 303-467-7821. My name is Bruce Simmons. I am the reverse mortgage manager for American Liberty Mortgage here in Denver and I’ve been doing reverse mortgages for over 15 years now and I’ve worked for six and a half, going on almost seven years now for American Liberty Mortgage. Excellent, excellent company to work for and to do business with. So please feel free to call me at 303-467-7821.
Okay. I’d mentioned that we’re gonna talk about a couple of articles. One came out on April 3rd. “Eight Factors Retirees Should Consider Before Getting a Reverse Mortgage.” “Eight Factors Retirees Should Consider Before Getting a Reverse Mortgage.” And again, that was in U.S. News and World Report on April 3rd. It was written by a journalist named Rachel Hartman. And then the other article came out … and I don’t remember … I get all kinds of reverse mortgage information and this was a blog that one of the writers who works for reverse mortgage Daily, which is a daily blog that I get. She talked about, is the new reverse mortgage and better deal for consumers? By new, they mean after October 2nd. Last October 2nd, there were some changes with the reverse mortgage and some of them negatively impacted people, some were positive. But anyway, so that article I’m gonna be talking about as well as long as we have enough time and we get through the Eight Factors Retirees Should Consider Before Getting a Reverse Mortgage.
However, I wanna make sure that you understand, especially if you’ve never heard this show before. A reverse mortgage is a FHA insured loan that’s specifically designed for people who are wanting to convert a portion of the value of their home into tax free money. Basically, they’re converting an illiquid asset into a liquid asset. Taking the money from the equity in their home that they want to keep. Most of the time, people want to stay in their home when they do this. What it does though, is as long as they live there, they never have to make a payment on this loan. However, the home stays in their name. You do not give up title to the bank on your house when you do a reverse mortgage. The house stays in your name, so you do have to continue to pay the property taxes and homeowners insurance, as well as maintain the home and live there. Those four things. As long as you live in the home, pay the taxes, pay the insurance and maintain it, you can never be kicked out.
In fact, it’s funny ’cause I’m in the middle of a remodel … well, I’m not in the middle, I’m just still starting. We’re having engineers come out and all this stuff, but we’re in the process … we’re gonna new hardwood floors in a big part of the house so we have to move some stuff. We’ve got this only piano that has a dead key and we put an ad in Craig’s List to see if we could sell it for $100. Well, a charity or some people who help out women and girls, kids that are in the sex slave industry … so they take these donation and they sell them and then they donate the money to help these kids. They wanted to come out and … they replied to the ad and I said, “yeah we’d donate the piano to you, we don’t need the extra $100, even if somebody did want the piano.”
So we’re giving it to them and I got to talking to the lady and she said, “yeah, you’re in the mortgage business.” I said, “yeah I specialize in reverse mortgages.” She said, “My dad’s thinking about doing that but I’m really super leery about it.” And she said, “mainly, my concern is that if they use up all the money, they say they’re only gonna live till 90, but who knows. If they live till 105 and they’re still in the house, what happens if they owe more than it’s worth.” And in that case, as long as they pay their taxes, their homeowner’s insurance, maintain the home and live there, they can continue to live there. She just said, “I wanna make sure they’re not gonna be kicked out on the street.” And I said, “that’s fine. We’ll allow a few extra minutes when you come pick up the piano,” so next week we’re gonna be talking about that. And unfortunately, her father lives in California and I’m only licensed in Colorado.
We do have offices in Florida, so if you’ve got family in Florida, I can help them out with that because we’ve got people over there that can help out and I can be your contact here. So in that situation, if you’ve got relatives around the country, let me know. I can answer your questions for you still and then refer you to somebody. And if that website that I just mentioned, that NRMLA, the National Reverse Mortgage Lenders Association, they’ve got a link on there with a drop down menu where you can find other National Reverse Mortgage Lenders Association members and you wanna work with somebody who’s a member of the reverse mortgage community because that shows more dedication. And if possible, you wanna work with somebody who’s a certified reverse mortgage professional like I am. They’ve gone through the extra training and the extra continued education and they’re dedicated to helping people regardless.
Like, I wouldn’t make any money. I can’t get a referral fee and in the mortgage business, unless I’m referring to somebody in my own company, I cannot make any money. If I … like I told this lady, I said, “If I refer you to somebody in California, I’m not gonna make any money on it.” ‘CAuse she thought I was going to. I said, “No. I know a couple really good people out there. I think one is in Southern California, one’s in the Bay area,” and I said, “if your parents live somewhere in between and they wanna deal directly with somebody, we’ll go to this website, the reversemortgage.org and find somebody in their area that can help them. And that’s just kinda the way I work and I don’t have a problem answering your questions or anybody else’s who calls me. I had a financial advisor who refers me business. One of his clients called and she’s in Idaho. I couldn’t help her, but I walked her through the process.
So that’s what a reverse mortgage is. It allows you to convert a portion of the value of your home into tax free money that you never have to repay as long as you live in the home. You’re still charged interest every month. So that interest gets added to the loan balance. Your loan balance gets larger over time, but you can never be kicked out as long as you do those four things that I had mentioned a dew times already.
This article that came out in U.S. News and World Report. “Eight Factors Retirees Should Consider Before Getting a Reverse Mortgage.” They talk about number one, they say, “understand what it entails,” and that’s why you’re listening to this show. And also, you can go to reversemortgage.org, they’ve got a ton of information on that website that’s excellent. It’s probably the best mortgage website … it’s better than mine, actually. I hate to say that but they have a whole lot more money to spend than I do. They take my dues and put it toward things like that that help inform people and things. My website is reversemortgageradio.net. And you can see, I’ve got customer testimonials on there, I’ve got a few videos of me on there, there’s some other videos on there as well. Also there’s a lot of good written information, too. Just keep that in mind.
But understand what it entails. That’s the key thing, the basics of it. You know that you’re not giving up title to the house. It is a loan so you’re still charged interest, but that interest gets added to the loan balance, so the loan balance gets larger over time. And you can sell the home whenever you want. If you owe more on the house than it’s worth, you’re never gonna have to be personally responsible for that or you’re not gonna pass that debt to your heirs either. Because there’s mortgage insurance on all reverse mortgage loans. All FHA reverse mortgage loans, I should say. So that’s number one.
Number two. Look at payment options. There’s several ways you can receive money from the reverse mortgage. You could take it as a lump sum. If you have a big mortgage you have to pay off, we’re gonna take the majority of that money, or all of it in some cases, and pay off that existing mortgage. That means there wouldn’t be any money left over or very little money left over to make a monthly payment to you or to draw on a line of credit, but you’re gonna be out from under the principle and interest payment of your mortgage. Now, a lot of times people get confused. They say, “Well, I pay $1200 for my mortgage.” And I say, “Well, you’re not gonna save $1200 because part of your mortgage payment is most likely going to pay for property taxes or homeowner’s insurance.” You still have to pay those yourself. When we pay off your loan, you’re gonna get rid of that $1200, but your taxes and insurance might be $300 a month. If you’re taxes are $1800 and your insurance is another $1200, then that’s $3000, that’s $250 a month you’re gonna have to save still to make sure that you can pay your own taxes and insurance. So you’re not saving the full payment, but you are saving the principle and interest portion.
You could take the money, like I said, as a lump sum. You could also set up a line of credit. That’s probably one of the most common ways is to set the money aside in a line of credit. I just got an email from a lady shopping around for her mom and she has a mortgage, I don’t know, $160,000 mortgage and a $400,000 home or something and she’s wanting to pay off the loan and the rest of the money, leave in a line of credit. And that way, the money’s available at a later date and there’s all kinds of benefits to setting up a line of credit and I’ve talked about those in the past. I’ve got information on it on my website as well.
The other way is you can receive a monthly income. It’s funny ’cause I did a loan for a lady years ago, 2004 I think was her first loan, I redid it in 2009. Lillian. She called me again … Marie knows about Lillian.
Yes, I love her story.
She is such a sweet lady and she is gonna be 94 here in a few months.
Wow, good for her.
Yeah. I originally did the loan when shew as 80 and then we redid it again in 2009. Well, she’s getting $1200 a month. At a certain point, and at some point I should probably talk about this on the radio, but once your loan balance reaches a certain amount, basically HUD takes over the servicing and that’s what happened to her a few months ago. Well, the contractor that works for HUD isn’t as, I don’t know, on the ball as some of the other contractors and they want her to prove that she’s paid her taxes and insurance. Normally, that’s done by a third party, the servicer will hire a third party company to make sure that the taxes have been paid. They want her to send them receipts and all this stuff, so she didn’t understand. But what they did is they stopped her payment. She didn’t get her $1200 in April because she didn’t know about this, she didn’t understand the letter. So she called me and I went out to her and we called the customer service and I helped her get it taken care of, so I printed that stuff up and emailed it to them. But still, she’s receiving this monthly payment. That was the point to start with was the monthly payment.
‘Cause that’s an option.
Yes. It is an option. And most of the time, servicing will not stop that payment. But in her case, because she didn’t do these things that they wanted her to do, that’s what happened.
Lucky for her, she had Bruce Simmons who follows up years afterward.
That’s right, yes. So 2009 was the last time I closed a loan for her and now we’re in 2018, so-
But she’s still your customer.
Darn right. That’s what I tell everybody. Thank you, Marie. When I close a loan for somebody, it doesn’t matter who’s servicing the loan. She started off with the evil empire. Back when I was working for a big bank. And then they sold the loan to another company and then HUD took it over once her loan balance reached a certain percent of the loan amount. And so now she’s on her third service provider, but she always knows she can call me and ask me questions. No matter who sends her the statements. And I helped her work through that.
The most common way is a combination of all of these. A lot of people will set up a monthly income. They’ll set up a line of credit and they take a part of the money up front. And so that’s a combination. They might pay off a small $20,000 home equity loan and wanna get $500 a month to supplement their income and leave $50,000 in a line of credit. And it all depends on how much money you have available, too. You might not have all those options. If you have this big mortgage, the only option you might have is the lump sum. So just keep that in mind. So those are the different payment options. That’s number two, look at the payment options.
Number three is check your equity. They talk about, “a reverse mortgage is only a viable option if you have a substantial amount of equity in your home.” Typically, we will loan somewhere between 40 to 60% of the value. If you’re in your lower 60s, ’cause 62 is the minimum age to get a reverse mortgage. If you’re in your early 60s, you’re gonna get closer to 40%. If you’re 90, close to it, you’re gonna get closer to 60%, maybe a little more. Keep those in mind. The older you are, the more you can get. And it also depends on the interest rates, too. As the interest rates rise, the amount of money you can get is reduced.
Number found. Ask about fees. “with a reverse mortgage” … and this is what the article says, “you can expect initial expenses such as closing cost, loan origination and appraisal fees.” Now, they also talk in here, and this is common in a lot of articles. They say, “you’ll be required to set up a session” … well that’s the counseling. Lets see. They talk about, “the lender may also charge loan servicing fees.” That’s rare. I haven’t seen that since 2009 I think. So most lenders are not gonna do that. If your lender is quoting you a monthly servicing charge, don’t do it because they’re just doing that for profit. Right now, if I wanted to make more money on a reverse mortgage, I could charge you a 25, 30 or $35 monthly servicing fee and the people I sell the loan to would pay me more because the loan is worth more. There’s that extra $30 profit, or whatever it is, every month that they get. Don’t do it. Keep that in mind. Also, too, you should not have to pre-pay any fees. Don’t let the lender charge you anything up front. If a lender wants to collect money up front from you, that’s not the way it should be. Some people do, but I don’t agree with that.
Because it can be part of the loan, right? It can come out of the equity.
Yeah. I’m still charging you the fee, but I’m not collecting it up front. Basically, the way they look at it is it’s a CYA type thing. If the appraisal doesn’t come in high enough of you end up canceling the loan, they’re not out that up front money because that’s really … the appraisal and credit report fee, some lenders will collect that as well, those are the only fees that we, as lenders, have to put out up front. And if you end up canceling the loan or we can’t close the loan for some wacky reason, some weird lean shows up on title or something or the value doesn’t come in high enough, then we’re out that money unless we’ve collected it from you. I look at that as a business expense. That’s a cost of doing business. I’d rather not collect that money from you. Personally, I don’t take an application unless I’m sure I can close it. Every now and again, I come through a time where I can’t get it closed and I just look at that as a business expense.
The other thing they talk about in this paragraph is, “You’ll be required to set up a session with a third party counselor fee to make sure you understand the loan.” I was talking with a lady who I ended up doing the application for and she was telling me she initially started talking with an out-of-state lender and she said, “Oh yeah, I was talking to this other lender and they told me that I would be getting a call from somebody out-of-state and it was $125.” Well, the counseling can cost money when you do it over the phone. If you do it in person, it’s free and most of the time, nine times out of 10, an out-of-state lender will either tell you a number to call directly or they have somebody call you, both of which are ethically wrong. The National Reverse Mortgage Lenders Association does not want anybody directing you to a specific reverse mortgage counselor. They shouldn’t be doing that.
Well, the counselor is supposed to be an impartial third party, right?
That’s right. And they know that if you did your own research and you found a local reverse mortgage counselor when you go to them, they’re gonna give you a list of local reverse mortgage lenders. And a lot of people don’t know that we’re here right in Colorado. You don’t have to go to California or New York or Texas. Those are where most of the people call from out-of-state. And then they’ll send you a big, fat packet and you will never talk to them again. If you have problems with servicing down the road, you’re not gonna be able to call them. If you have a spouse pass away and now your adult child is involved in the … and has some questions about the reverse mortgage, nobody’s gonna be there to come out and talk to you directly like I’ve done for people in the past. And like Lillian up in Boulder, she’s just the sweetest lady in the world, I love going to see her. But that’s beside the point, even if I didn’t like her, I would go see her because that’s part of the job. She’s my customer.
We’re talking about “Eight Factors Retirees Should Consider Before Getting a Reverse Mortgage.” It’s an article that came out in U.S. News and World Report last April 3rd. And they talked about, number one was, understand what the reverse mortgage entails, understand how it works. Look at the payment options ’cause there’s multiple payment options, multiple ways you can receive the money from the reverse mortgage. Understand that we only loan a certain amount of the equity to the home, and you need to have a fair amount of equity in your home in order to get a reverse mortgage. And also, ask about the fees. Be aware that fees are involved and unfortunately, in these times that we’re in now, it’s rare to get a credit towards the fees. A year ago, I could do a loan for some people for free. Literally, I would pay 100% of the closing costs. That does not happen anymore. That’s just the nature of the way it is. Interest rates are going up and our expenses are going up as well, and so that’s just the way it is.
Number five. Think long term. ‘Cause reverse mortgages, with these upfront costs, it takes a while to get your money back or you don’t wanna do a reverse mortgage and then pay off the loan a year or two later. Just because you lose all that money you paid for the upfront cost. The biggest one is the upfront mortgage insurance, which I’ve talked about before and I don’t have time today to talk about, but keep that in mind. That you need to plan to be in your home for a while. Now, there’s no penalty for paying the loan off early, but you’re not going to get a refund of any of these upfront costs.
Talk to family members, as well. If you’ve been planning to leave your home to your heirs or reverse mortgage … this is one thing I wanna point out here too because this is typical in most of these articles. They say if you’re planning to leave your home to your heirs, a reverse mortgage may not be the right option. If you don’t have any heirs, they say, and you plan on staying in your home forever, it could be perfect. You know what, though? That’s the typical way to look at it. Odds are, there’s gonna be a fair amount of equity in your home, but you need to have the mindset that there’s not gonna be any equity left in your home. If you enter in with that attitude, if you have to sell your home down the road and you get $100,000 because you still have equity in your house, then you win. But on the other side, if you use up all the equity and there is no equity in your home, you’ve won too because you took advantage of all the equity that you have in your home and you stayed there. So keep that in mind.
But it’s a good idea to talk to family members, get an idea of where they stand and let them know what you’re doing. Although I’ve done loans for people that have said, “Nope. I don’t wanna tell my kids. They don’t need to know, it’s none of their business.” So I’ve done it both ways for people.
Know how you’re gonna use a reverse mortgage. This is important because this is not free money. You’re being charged interest for this money and you’re using your equity. Now, I’ve done loans for people who have talked about taking a big trip to Europe to go back to where they served after World War II and all. And that’s good, but don’t spend all your money on that. Maybe enjoy some things, but keep some in reserve, too. If you’re a big spendthrift, it might be best to set up a monthly payment so you’re not gonna spend more than you should every month and then you know that if you’ve got a big trip planned, you’re gonna have to save it. You’re gonna save it just like as if you were earning it with a paycheck or your social security, whatever. You’re gonna save for four, five, six months, put that money aside and then you can spend it. So just to keep that in mind.
Number eight looks at other options. There are other options, too. It might be in your better interest to sell the house, maybe downsize or maybe, in some cases, too, people move in with their family. I know that’s probably not what you wanna hear, but that is what happens sometimes. Your family may not wanna hear it either. I know if my dad or mom called and said, “Hey, we’re gonna move in with you,” I would be hesitant, let’s say. They’re great people, I love them, but I would be hesitant. And I certainly wouldn’t wanna live with my two boys, so you wanna be independent as long as possible, but if that is not possible, keep it in mind. You wanna look at all your options.
So, that was the last four. Again, this was an article, “Eight Factors Retirees Should Consider Before Getting a Reverse Mortgage” from U.S. News and World Report. Unfortunately, I’m not gonna even have time to touch the other article, we’ll have to save that for another day.
The eight real quick summary is, understand what the reverse mortgage entails, understand how it works.
Look at the different payment options ’cause you can receive the money a number of different ways.
Be aware of how much equity you have to start with, that’s number three.
Number four, ask the lender about fees, do a little shopping. Be aware of the different options ’cause different lenders have different fees.
Think long term when you’re doing a reverse mortgage. It’s not a short-term option. It shouldn’t be, anyway.
Talk to other family members. Let them know what’s going on and what you’re thinking about.
Number seven, know how you’re planning on using the reverse mortgage money. Keep that in mind.
And number eight, look over all the options. You’re not stuck in your house. You don’t wanna be stuck in your house. If a reverse mortgage is gonna help you live the lifestyle you want asa retiree, definitely do that. Do it then. If not, then don’t. Be aware of that.
My name is Bruce Simmons and I am the Reverse Mortgage Manager for American Liberty Mortgage right here in Denver and you can visit me online at reversemortgageradio.net or call me directly at 303-467-7821. And remember, next week starting on the 23rd or 24th is Reverse Mortgage Education Week with free seminars and things. Go to my website, check it out on my blog and hope you have a great day. My name is Bruce Simmons.
Call reverse mortgage specialist Bruce Simmons and American Liberty Mortgage directly at 303-467-7821 to begin drawing equity from your home. Bruce will come to you anywhere in the Front Range for an in-person, no obligation consultation. Learn more about reverse mortgages and watch testimonial videos on reversemortgageradio.net.
NMLS number 409914 regulated by the Division of Real Estate.