Compare the benefits of a traditional bank home equity line of credit to an FHA insured Home Equity Conversion Mortgage line of credit

Compare the benefits of a traditional bank home equity line of credit to an FHA insured Home Equity Conversion Mortgage line of credit
On Reverse Mortgage Radio this week, we compare the benefits of a traditional bank home equity line of credit to an FHA insured Home Equity Conversion Mortgage line of credit. The results may surprise you.

KLZ’s Ask the Experts proudly introduces Reverse Mortgage Radio, hosted by reverse mortgage specialist, Bruce Simmons. For over 14 years, Bruce has delivered homeowners 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.

Bruce Simmons: Shakespeare once asked his audience, “If a rose by any other name would smell as sweet.” I’m Bruce Simmons from American Liberty Mortgage. I’m the Reverse Mortgage Manager here, and you’re listening to Reverse Mortgage Radio. Thank you so much for tuning in today. We’re approaching Christmas here, and we’re going to talk about reverse mortgages and how Shakespeare’s quote applies. Before we do that, I’ve got some riddles. I’m going to make a statement, and Marie actually, I need your feedback on this.

Maria: All right, here we go.

Bruce Simmons: Tell me what the name of the Christmas carol is.

Maria: Okay.

Bruce Simmons: Here we go. We’ll just try this one real quick. “A member of Roundtable with missing areas.”

Maria: Member of round table with missing areas?

Bruce Simmons: Yes.

Maria: All I can think of is the Knights of the Roundtable. I have no idea.

Bruce Simmons: O’ Holy Night. There you go.

Maria: I got part of it.

Bruce Simmons: You did. That was good. Close, so you get the gist. We’ll just go through a couple of these. Maybe I’ll interject a few of them throughout the show just for fun.

Maria: All right. I like these better than your turkey jokes.

Bruce Simmons: Oh, come on. I’ve got a great one to end the show though, that you’ll like. No, you probably won’t. The turkey jokes are good. I like those. “Boulder of the tinkling metal spheres.”

Maria: Boulder is like a rock.

Bruce Simmons: Mm-hmm (affirmative).

Maria: Tinkling metal spheres are bells?

Bruce Simmons: Yes.

Maria: Jingle Bells?

Bruce Simmons: Jingle Bell Rock. That was good.

Maria: Oh, Jingle Bell Rock! Okay. I was close.

Bruce Simmons: Very good, yes. “Wanted in December. Top forward incisors.”

Maria: All I Need for Christmas is My Front Teeth.

Bruce Simmons: That’s right. All I Want for Christmas is my Two Front Teeth. You’re good at this. I didn’t get any of them.

Maria: Maybe it helps that I was an English major. I like words.

Bruce Simmons: Exactly. One more, here. “Far off in a hay bin.”

Maria: Away in a Manger.

Bruce Simmons: You’re good. Boy, did you get the notes on this?

Maria: Nope.

Bruce Simmons: Good job. All right. I might throw a few of those in throughout the show. What I want to talk about today is comparing reverse mortgages to a HELOC. A lot of people are trying to decide, “Oh, maybe I should just get a Home Equity Line of Credit from my bank,” or, “Maybe I should a reverse mortgage.” Which is which?

There was a study earlier this year. It was pretty interesting. It was conducted by a company that I actually sell loans to, because the way I work, I do business as a reverse mortgage manager, my company American Liberty Mortgage, the company I work for, I don’t own it … we close the loan in our name, and then we sell the loan to different investors.

This one company called Reverse Mortgage Funding, they’re very good. Their underwriting is clean, they’ve got real good customer service. In fact, I’ve never had a complaint. They’re my main investor, and I’ve never had a customer complaint from them. They get on the phone with customers sometimes, and we call customer service. This is all after the loan is closed. Just so you know, even though we sell the loan, you’re still my customer. You don’t get rid of me that easily.

I’m not a transactional type lender. I always tell everybody … my phone number, by the way, I should give you that. My name is Bruce Simmons, and I’m the Reverse Mortgage Manager with American Liberty Mortgage. My phone number is 303-467-7821. I’ve had that same phone number since 1999. That’s when I started my business. I had a small little mortgage company and operated out of my basement at the time. There was no licensing or anything involved. I got a fax machine, and a business line into my house and I was in business. I also had business cards, but I was in business.

Then, I started doing reverse mortgages in January 2003, for the Evil Empire, then I left the Evil Empire to go to the Mini Evil Empire, and I was only there a very short time, just six months. Then, I came to American Liberty Mortgage in September 2011. I’ve been there ever since. I’ve been there six years now. Throughout that time period, I’ve always kept the same phone number. I still do get calls from people I did loans for in 2004, 2005 and 2006.

Sometimes, customer’s family call me and say, “Hey, my mom had to move out of her house,” or, “Unfortunately my parent passed away and now the loan is due. What do we do?” I help them through that. You can always reach me at 303-467-7821. That’s my main line. Just so you know, too, because I’ve had people try to text me at that number. That actually is my office number that rings into my office in my house. I have it forwarded to my cell phone most of the time, because I’m in American Liberty Mortgage’s office in Denver, and they’ve got an office number. Their office number, if you want to check them out, they’re Better Business rated and everything. Their phone number is 303-458-3778.

When I’m in the office, you can always reach me at that number, but I’m not in the office a lot of times because I’m out seeing people or recording these shows, or talking with potential referral partners like bankers or financial advisors and real estate agents. I teach classes. I keep busy. I’m not in the office a lot, probably 50 percent of the time. Anyways, I got off topic.

Maria: You were saying you can’t get text messages.

Bruce Simmons: Oh, that’s right. That’s not my cell number, so don’t text me at that number. Going back to, “Consumers Like Reverse Mortgages When They’re Called Something Else.” That was an article that came out in March, and about that time … well actually in January reverse mortgage had a group where they took some of the main partners, is what they call us, out to Vegas and we they wanted our feedback and we had these classes and things. They showed us this survey that they did.

It was a blind test, a taste test if you will, where they compared the features and benefits of a Home Equity Line of Credit to features and benefits of a reverse mortgage without using the titles Home Equity Line of Credit or reverse mortgage. At that time, the studies from reverse mortgage finding, researchers presented information about both the Home Equity Conversion Mortgage line of credit, that’s the reverse mortgage; and traditional forward Home Equity Line of Credit, but notably did not name either product.

The groups were then asked which potential option fit their retirement planning needs. 58 percent of consumers, and 43 percent of financial planners selected the Home Equity Conversion Mortgage line of credit over the regular tradition Home Equity Line of Credit from a bank. A separate focus group of consumers and planners then were presented with the same information, but both products were clearly identified. This was labeled Home Equity Line of Credit, this was labeled Reverse Mortgage Line of Credit.

Consumer sentiment swung widely with 68 percent of the consumers saying that they prefer the regular traditional Home Equity Line of Credit over a reverse mortgage. Where before, 58 percent preferred the reverse mortgage. Also, only 37 percent of financial planners picked the Home Equity Line of Credit, where 43 before did when they didn’t know the name. Basically, it’s the bias that you have.

People hear reverse mortgages, and they have this preconceived bias that it’s a ripoff, that you have to give the title to the bank, that the bank is going to take your house when you die, all these misconceptions. We’ve talked about these over the past. By the way, if you ever want to go back and listen to any of the shows that I’ve done previously, you can go to my website at is my website, and I’ve got all the shows. I’ve been doing this show since May, and we’re now through December. So, it’s at about six or seven months that we’ve been doing the show for. All my shows are up there. You can hear … and I’ve repeated things throughout.

In fact, one of the things I repeat every show, which I haven’t done yet is to explain what a reverse mortgage is. Just real quick in case you’re just tuning in for the first time and never heard me before, reverse mortgages, basically the Home Equity Conversion Mortgage, which is the FHA program, is a loan that’s FHA-insured, specifically designed for people who are 62 and over. What it does is it allows you to convert part of the value of your home into tax-free money that you can use however you want.

As long as you live in the home, pay your property taxes, homeowner’s insurance and maintain the home, you never, ever, ever have to make an actual mortgage payment on the house. You can receive the money any way you want. You could set up a line of credit, do a monthly income program, take a lump sum, or any combination. We, a lot of times, pay off an existing mortgage for somebody.

I’m doing a closing this afternoon, actually, with a customer, Norvada. He owns his home free and clear, but he’s taking out $5,000.00 up front to take care of some miscellaneous things and repairs in his house. He’s also setting up a payment for $600.00 a month and he has $25,000.00 left over in a line of credit. He’s an artist, and he’s really … he needed that additional income to make sure that when he sells a piece of work, then he makes a lot of money. He goes long times in between selling these pieces of work.

The benefit of that, too, is that it’s so flexible. If he does have two, three or four sales in back to back months, he could then stop the payment plan if he wanted to. Stop it for the next six months or a year, even, and then pick it back up if sales decline.

Maria: So, he’s getting an income from his house?

Bruce Simmons: That’s right. Exactly.

Maria: Wow, that’s a good deal.

Bruce Simmons: Yes, it’s very good. He’s generating a monthly income. We’re depositing money every month, $600.00 a month, into his bank account based on the equity in his house. Now, the thing you have to remember about that is the loan balance continues to get higher and higher. Every month he’s receiving the $600.00, so that gets added to his loan balance, plus he’s charged interest and mortgage insurance, all FHA loans have mortgage insurance and reverse mortgages are no different.

He’s got those extra charges every month being added to his loan balance, but as long as he lives there, he never has to make a payment. Never has to pay it back. The loan only comes due when he permanently leaves the home. As long as he pays his taxes and insurance and maintains the home … well, actually it’s a town home, so it’s even easier for him, he just has to live there and do those things, and he never has to leave.

Maria: So, the equity in his house is shrinking a little bit, but he has more money in the bank.

Bruce Simmons: That’s right. Yup. Odds are, the fact that we only loan between roughly 40 to 65 percent of the value of the home, there’s a lot of equity … he’s going to have a lot of equity in his house no matter what, because the way he’s taking the money over time, homes are appreciating at eight to 10 percent a year. He’s got a $260,000.00 home, 10 percent of that is $26,000.00. That’s more than what he’s going to be charged in interest, mortgage insurance and monthly payments this year. He’s actually gaining equity based on that appreciation.

Maria: So, he’ll still have something to leave to his heirs if he wants to, etc.

Bruce Simmons: That’s right. Or, if he has to sell his house 10 years down the road, he can. Same thing. Let’s get back. Basically, that’s how reverse mortgages work. If you have any questions about anything I’m talking about, or you missed part of it, feel free to call me. My direct line is 303-467-7821. It’s just interesting in this study how people have these preconceived notions.

Basically, comparing a reverse mortgage to a Home Equity Line of Credit … and I’ve got a handout that I do, and actually they did a video … Reverse Mortgage Funding did a video of this class. I need to get that up on my website, because it’s out in public domain. You could YouTube HELOC versus Home Equity Conversion Mortgage line of credit, I think. I don’t remember. I didn’t Google it myself. I’ve seen the video and it’s just a two minute clip and it shows how it all was set out.

Here is the bottom line, if you’re looking at comparisons, this is what you’ll want to do. Everybody should do this. When I worked for the Evil Empire, I would meet with a banker, and the banker would give the homeowner the benefits and costs of a Home Equity Line of Credit, and then I would present the pros and cons of reverse mortgages so people could make an informed decision.

You can definitely do that. I can give you everything and break it down for you. You can go to your banker, or look at another possible loan option. It’s a good way to look at it. Basically, here we go: the Reverse Mortgage Line of Credit has no mortgage payments. The line of credit, you have to pay interest-only payments, you have to make payments on that loan if you pull money out. With Home Equity Line of Credit, it can expire in 10 years. You have to renew it, basically, after a 10 year period. So, you have to re-qualify.

If you don’t re-qualify, then you have to start making payments. If they can’t qualify and extend you a line of credit, then you’ll have to paying principle and interest, so your payments go up. I did a loan for a customer like that who had a Home Equity Line of Credit with the Evil Empire. This is just a couple of years ago … the Evil Empire is a bank that I used to work for.

Maria: I keep hearing the Star Wars music in my head.

Bruce Simmons: There you go. That’s right. Anyways, that’s just my own personal term for them. It’s a big bank, and I don’t want to say anything negative, but their initials are Wells Fargo. I’m sorry. They are a good company, okay? I don’t want to say … I’m not bad mouthing them, okay?

Maria: You just preferred to work for yourself.

Bruce Simmons: Yeah, I did. I prefer working for American Liberty Mortgage. I like working for small companies, and I think that they provide better customer service. What happens with the line of credit for this customer, is he didn’t have enough income … Wells Fargo would not renew his line of credit, so he had to start making principle and interest payments over like a 15 year term to pay that loan back, so it would be paid off in 15 years. He only owed $35,000.00, something like that.

His payment was worked out to be a little less than $400.00 month, if memory serves me. Well, I was able to give him a reverse mortgage and pay off that line of credit and set up a new line of credit for him, that will never expire. That’s one of the benefits with the Reverse Mortgage Line of Credit. As long as you’re living in your home and paying your taxes and insurance, and maintaining the home, that line of credit, as long as you don’t use it all up, will always be available for you.

That leads to another benefit … well, another comparison. With a Reverse Mortgage Line of Credit, that line of credit can never be closed as long as you do those things. Even if your value drops … back in 2008, people’s values dropped by 30, 40, 50 percent in some cases. I talked to a number of people that called me and said, “My bank just reduced my $80,000.00 line of credit down to $20,000.00 because my value went down on my house.” That cannot happen with a reverse mortgage.

Reverse mortgages, that line of credit is guaranteed. Now, one thing with a HELOC reverse mortgage, a lot of those are pretty cheap. Sometimes you don’t need an appraisal, depending on the equity that you have in your house, and the startup fees are $500.00 in some cases. Some cases $1,000.00. With a Home Equity Line of Credit, or with a Home Equity Conversion Mortgage line of credit, a Reverse Mortgage Line of Credit, there are closing costs associated with it. Those closing costs comparatively, just comparing one to the other, are higher with a reverse mortgage compared to a regular bank Home Equity Line of Credit. Keep that in mind.

That’s one of the things you want to compare-

Maria: Can you explain the names one more time? You’re talking about two different lines of credit, and I’m getting them mixed up.

Bruce Simmons: Yes, I’m sorry. Thank you for that. I’m going back and forth. Home Equity Conversion Mortgage is the name of the reverse mortgage program with FHA.

Maria: That’s what you call HECM.

Bruce Simmons: HECM.

Maria: Okay.

Bruce Simmons: That’s a HECM line of credit, which I use interchangeably with reverse mortgage. FHA has about 99 percent of the market for reverse mortgages, about 99 percent of the loans made that are reverse mortgages are FHA Home Equity Conversion Mortgages. A lot of people, myself included, will just use the term reverse mortgage and HECM reverse mortgage, or just HECM, interchangeably.

Maria: Okay, gotcha. So, those are basically the same thing.

Bruce Simmons: They are the same thing, yes. They are.

Maria: So, there’s HECM/Reverse Mortgage and then there’s the regular line of credit-

Bruce Simmons: Home Equity Line of Credit, or what people call HELOC.

Maria: HELOC v. HECM. Gotcha.

Bruce Simmons: Maybe I should just keep with those terms. HELOC v. HECM.

Maria: I like that.

Bruce Simmons: All right, now not all HECMs are lines of credit though, either.

Maria: Well, for the purposes of this conversation, let’s just say that.

Bruce Simmons: Let’s keep it that way. Good. A HECM has easier credit and income-qualifying most of the time. HELOC, a Home Equity Line of Credit from the bank, is going to be a little more difficult to qualify sometimes. Just like the guy who had that loan and he wasn’t able to qualify, we can do some different things as far as income goes to get you to qualify.

In some cases we can’t do enough, and I can’t qualify somebody, but a lot of times we can. It’s easier to qualify. One unique feature about the HECM line of credit is that the line of credit actually gets larger over time. Regular bank HELOC, it’s a static amount. You get a $50,000.00 line of credit, it stays there. If you use $30,000.00 of it, you have $20,000.00 left.

With a HECM line of credit, a Home Equity Conversion Mortgage line of credit, basically that line of credit gets larger. Every month it gets larger, it grows by a little bit. Actually, I think I did a whole show on how that works. Sometimes I’ll get into the weeds in this show, but we’ll see. I hopefully won’t do that today.

You know what? I think it’s time for another question today, another song: “Leave and broadcast from an elevation.” This is the Christmas carol that I’m describing, “Leave and broadcast from an elevation.”

Maria: Go Tell It on The Mountain.

Bruce Simmons: There you are. You are good, girl.

Maria: Man, these are fun.

Bruce Simmons: One more, “We are Kong, Leer and Nat Cole.”

Maria: Three Kings.

Bruce Simmons: We Three Kings, that’s right.

Maria: Okay. Great.

Bruce Simmons: Man, you’re good. Okay, I haven’t stumped you yet, I don’t think.

Maria: Well, the first couple I didn’t get, but I’ve got the hang of it now.

Bruce Simmons: Yeah, I think you do. Back to the line of credit, the Home Equity Line of Credit versus the Home Equity Conversion Mortgage Line of Credit.

Maria: So far, it seems like the reverse one is a lot better.

Bruce Simmons: Depending upon what your goals are. One thing, too, because the closing costs are a little higher with the reverse mortgage, HECM line of credit, is that if you’re only going to be there for a temporary time … let’s say you need some money to do some repairs on the home so you could sell it. In that case, certainly, all I offer is reverse mortgages. I don’t offer any other kind of loan. I would say, “You should go to your bank or credit unit and get a HELOC, a regular HELOC.”

Maria: If somebody is trying to decide between those two, will you give them advice?

Bruce Simmons: Oh, yeah. I get paid on commission, okay? If you don’t do the loan with me, I don’t get paid. But, knock on wood, I’ve never had a customer or a family member come back to me and tell me they’ve regretted doing this. I don’t want to talk anybody into doing this. I’m going to tell you yes if you’re doubtful about the reverse mortgage, learn the facts about reverse mortgages before you make a decision. Then, take what you know about reverse mortgages and look at other options.

Maybe it makes more sense to sell the home. Maybe it makes more sense to get a HELOC. But if you can’t qualify for a Home Equity Line of Credit to fix up the house to sell it, maybe a reverse mortgage is in your best interest. There’s a lot of different factors that go into it. Everybody’s situation is unique. That’s why I like to sit down with you, the homeowners, the family members if needed, the financial advisors … and we’re going to talk about this next week, is using Home Equity Release Programs. That’s one of the other terms that is used for a reverse mortgage. Home Equity Release Programs.

There’s other ways of selling the house is a Home Equity Release Program. You get all the money from your house. You’ve released all of the equity. Basically what happens if the equity in your house is the difference between the value of your home and the amount owed against it. If you have a $300,000.00 home value, and you have a $100,000.00 mortgage, that means you have $200,000.00 in equity. That money is tied up. You don’t have access to it. It’s not in a liquid account.

Basically, by selling your house, you’ve released all that equity. With a reverse mortgage, you can release part of it. With a Home Equity Line of Credit, you can release part of it, but then you have to make payments on that program. Those are things that are all factored into the decision that you need to make with your family.

What I’m going to do is I’m going to get this, by Monday, I’m going to find this video, get it to my web guy, and have him upload it onto my computer so that you can find it there as well. I’ll upload it onto my website, I should say. My website address, just in case you don’t know it, is Again, you can call me with any questions at 303-467-7821. 303-467-7821.

My name is Bruce Simmons, and I am the Reverse Mortgage Manager with American Liberty Mortgage, right here in Denver. We’re local and we’ve been in business for 15 or 16 years now, I think, as a company. We’ve now got four offices in Florida. It’s funny because we had a guy move from Colorado Springs to Florida, and he wanted to still work with the company. It’s a really good company to work for.

The owner of the company said, “Okay, sure. We’ll open up an office there for you.” Now, we’ve got four there. We’ve got two here in Colorado, we’ve got one in Denver and one in Colorado Springs. We’ve got a lot of outside loan officers. We’ve got people in Fort Collins and all around that will send the loans to us. They might live there, they don’t come to the office very often. I’m in the office about 50 percent of the time, but they’ll come in once a year or twice a year.

We had holiday party, I should say, and it was great. It was at Top Golf down off of Rappahoe and Havana, I think. Cool place. One of those multi-level places, and you hit the golf balls off into the distance and you try to hit targets and things. It’s very cool. I didn’t know most of the people there. It’s not a big company. I think we have 50 or so loan officers, but I think there’s probably now 20 in Florida, and 30 or 40 here.

It’s a good company. It’s small, and I’m two doors down from the owner of the company. It’s great. In a nutshell, let me wrap this up here. You want to do your homework. You want to compare is a reverse mortgage … get all of the pros and cons. Find out the negatives. When you talk to somebody, they should be able to freely quote you the closing costs. You don’t have to meet with them in person to go over it.

I like to meet people in person to make sure they understand everything. I’ll email stuff to people. I did that earlier this week with a lady and her husband. They conferences all three of us on the phone. They were at work, because they both work still. I emailed the numbers to them. We went over all the numbers on the phone, and they said, “Hey, your costs are $4,000.00 less than this other company,” or $5,000.00. I said, “That’s because this, this, this and this.” We corresponded all through the phone and email. They said, “Okay, great. We’ll go get our counseling, and we’ll give you a call when we’re done.”

All right. We’ll do one more question here. This one is hard, okay? I’m going to see if I can.

Maria: Okay, I’m ready.

Bruce Simmons: All right, “Rose colored uncouth dolp is aware of the nature of precipitation, darling.”

Maria: Say it again.

Bruce Simmons: “Rose colored uncouth dolp is aware of the nature of precipitation, darling.” Maybe you’ll get this one.

Maria: I don’t know what dolp means. That’s what’s tripping me up here. I think you stumped me.

Bruce Simmons: Rude, dolp. An uncouth, rude, dolp … Rudolph the Red Nosed Reindeer.

Maria: Oh, dear is darling. Oh, that’s good. That’s good.

Bruce Simmons: Lastly, before we head out real quick: Two shepherds were leaning on their crooks at the end of a long day. The first asked the second, “So, how’s it going?” The second one shook his head, “Oh boy,” He signed heavily, “Not good. I can’t pay my bills, my health isn’t good, my kids don’t respect me, my wife’s leaving me.” The first one replied, “Well, don’t lose any sheep over it.

I had to end with a corny one, that’s my thing. Anyways, my name is Bruce Simmons. I’m the Reverse Mortgage Manager with American Liberty Mortgage. I’ve been doing reverses for 15 years now come January. I would love to talk with you. Feel free to call me directly at 303-467-7821. 303-467-7821. Call me with any questions, or visit me online at You can hear all of my previous podcasts as well. Thank you. Have a great day. Merry Christmas.

Call Reverse Mortgage Specialist Bruce Simmons from 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 NMLS Number 409914. Regulated by the Division of Real Estate.

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.

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.

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