Reverse Mortgage Radio Show - 04-12-2018
Have you ever wanted to talk with someone who has a reverse mortgage to learn why they did it or what they were thinking? Listen to today’s show and you will hear Steve from Littleton talk about his experience in getting a reverse mortgage for him and his wife who is not yet 62 years old.
Why Do People Get Reverse Mortgages
Welcome to Reverse Mortgage Radio. I'm your host Bruce Simmons and thank you so much for joining me today. We have a special guest in the studio today, but before we get to him, I do want ... I always like to start off the show with about what is a reverse mortgage because so many people have so many questions about reverse mortgages. You can call me with any questions, by the way too, at 303-467-7821. 303-467-7821 is my number or visit me online at reversemortgageradio.net. Reversemortgageradio.net. I was just racing here today I left a leads group that a co-worker is in. She had me subbing for her and I was talking to some people there about reverse mortgages and one of the guys had a reverse mortgage and was asking me all these questions about how it works and things. I'm kind of in that mode now.
A reverse mortgage is an FHA insured loan that's specifically designed for people who are 62 and over and allows you to convert a portion of the value of your home into tax-free money that you never have to pay back as long as you live in the home. Now the home is still in your name. It stays in your name. You are responsible to pay your own property taxes, homeowner's insurance, maintain it and live there. If you do those four things, you cannot be foreclosed on. Okay? Those are the key four things you have to do to stay there. You can, though, it still ... since it's still your house, you could paint your house pink or add a bedroom or remodel. Sell the house even, if you want. If you live there two or three years and you need to sell, go ahead and do it.
But it's your house. It stays your house with a reverse mortgage. Now, the money form a reverse mortgage is not free. You're still charged interest every month but you don't have to pay it. It gets added to your loan balance. Your loan balance increases over time instead of decreases as you make a mortgage payment as a normal, what I call forward mortgage. Keep that in mind. You are chewing up equity slowly over time, dependent upon how you use it, how much you take out up front. If you pull out $200,000 up front and the interest is being charged on the $200,000 balance, the interest you're charged is going to be a lot more than if you take out $30,000 up front and you're only charged interest on the $30,000. Because you're only charged for the money you actually take out.
And then it works that way so that you most likely will have a lot of equity left in your home. You're not giving your house to the bank. The bank does not take your house when you die. Like I said, we do have a special guest in the studio. A couple months ago, I guess it was, I'm not sure it was that long, I closed a loan for Steve from Littleton. He's a great guy and I'm going to have him talk about his situation. He's going to answer a few questions. Welcome, Steve. I appreciate you being here.
Thank you, Bruce.
What motivated you ... this is one of the key things that a lot of people say, "Well, why would I do a reverse mortgage?" What was your ... Do you mind telling us a little bit about your situation?
Well, the term has been obviously been around for quite a bit. As each year goes by, you seem to hear more and more about it. And we were just watching the tube one day and probably one of the bigger national companies had an ad on and offered if you contact them, they would send you a DVD and tell you all about it. We did that and that was probably in 2016. And one of the things ... I don't think they mentioned was the age situation regarding being 62. I think I might have even contacted you initially. Time goes by so quickly. And the first thing we ran into was this brick wall called your age. You're not old enough to play this game. We waited a year and in that timeframe, we went online to different sources and just became a little bit more familiar with what it's all about, everything that you just explained a few minutes ago.
That's where we were up until the point I contacted you, I guess back in December initially and said, "Hey, 62 is coming quickly. Let's do whatever we can do to start putting this in motion."
Okay. You educated yourself a fair amount over online then? You found different sources online?
Yeah, like I'm going to go see my doctor tomorrow for my annual physical, I don't want to tell him about something I saw online and he always cringes because people taking care of themselves via the internet is not a good thing. But, in this example, in this particular application, it was a good thing because we went to many different sources to see how ... make sure they all agreed or if they didn't agree, then to find out why they didn't agree on different things. But it became pretty much ... There's standardized rules and I'm sure the government makes it that way. And it's pretty cut and dry.
Yeah, for a lot of research that people do online is kind of a challenge for certain industries, but reverse mortgage, because it is so standardized, as far as interest rates and fees, those can vary but the rules are standard. And so that's a good way to do it. And then we ended up meeting and I worked up some figures for you and was able to answer your individual questions at that time.
Yeah. You did exactly that. And not all the figures were known at that point because there's other things that are not known up front, like an appraisal for example. But we plugged in some figures that we thought were close and then you took that information and crunched it and brought it back to us. And it became ... It just started picking up momentum.
Exactly. Well, good. Now, did you end up talking to a financial advisor about the reverse mortgage option?
My financial advisor. Yes, and I go back to the beginning. What did I say? It was 2016. He was very candid. He said, maybe even embarrassed to a degree because with all his years experience, reverse mortgage is new enough that he says, "I really don't know that I'm qualified to venture out with an opinion one way or the other."
Well, that's good actually because too often people are so ready to give advice on something they don't know about. I remember, it must have been 2002, before because I started doing reverses in 2003. About six months before I started I got a call from a customer of mine in his, I think he was in his 70s, I was doing conventional mortgages. And he called me and asked, "What do you know about reverse mortgages?" And I said, "You know, I don't really know anything but I think you need to get an attorney. I think that the bank takes your house and all these things." And they were totally false. And I had that come back to bite me when somebody, another lady wanted to talk to her attorney. And I said, "No, no, no. Let me talk to him." And she said, "No, I'll talk to him." She came back and said, "My attorney doesn't like reverse mortgages. Oh, by the way, who owns the house?"
And I was like "Yeah. So what goes around, comes around, right?" Yeah, it's a challenge. Well, that's good. You ended up talking to your financial advisor and does he know more about them now?
Absolutely. Yes. I think through his particular company that he represents, they probably have come of age as they would and say, "This phenomenon is going across the country. We need to make sure our people are as up-to-date as possible." Yes, he has come a long way.
Now, what would you say yours and your wife's biggest fears about doing the reverse mortgage are or were?
Well, you've already mentioned the standard misnomers that are out there in terms of, "Hey, the bank gets your house." And all that kind of stuff. And that was quickly ... We were able to put those to rest very quickly. I think maybe fear is maybe not the best word, but my wife's the type of person that says, "If I don't know a whole lot about something, I ..." That may be where the fear comes from. Again, I don't think it's the right word. It's just a matter of going out and arming yourself with some knowledge.
That's good. She, and well both of you really, you said, "Okay, this could be an option. It might not be but we're willing to do the homework to learn about it and find out the facts."
That's great. That's what I want everybody to do. If you're not sure if a reverse mortgage works for you or not, learn the facts first. And then make an informed decision because too often people will tell me, and customers in fact, like you, they say, "Yeah, I talked to my neighbor and I just mention reverse mortgages and they're like, they put their hands up, 'No. No. I can't do that. That's terrible.'" Because they don't know all the details about it and so that's, I don't know if you've experienced that.
Yeah. And then you match it up with your needs. Or maybe you define your needs before you even went down this road. You say, "Well, I have a need. Is this something that could help me meet my needs?" And that's the way it all went down for us.
Now you being, you just turned 62, your wife is not 62 yet, so you have actually, you're taking advantage of this situation that HUD made a rule change back in 2014 for what's called non-borrowing spouses, that's when one spouse is over 62 and the other one is under 62. And what it does is it allows the younger spouse to be protected. So if something were to happen to you, she could continue to live in the house, if she chose to. As long as she pays the taxes and insurance and things of that nature. Was that much of a concern for you? Or did you-
No, and actually that's where your expertise came in because when, how would we have known about that HUD rule change except for you to say, "Well hey, considering your age difference here, here's something you need to know but it's not really that important because of everything you just now said. As long as she were to keep up taxes and insurance and that type of stuff that hey, you're ... everything's cool."
Good. And so she's okay with that?
Good. Good. And then you still have a lot of equity in the house. But, I was I just talking to a guy at this leads group who he took out the loan, he wasn't sure eight to 10 years ago he said, before HUD made this change. And to my understanding, his wife would be grandfathered in. But back in the day, what they made you do is that the younger spouse had to come off title. We didn't have to do that in your case. And he was asking me, "Well, how can I get her back on title? And how can we do this so she's protected?" And I said, "Well, the first step," if you're in that situation where you did a reverse mortgage years ago and you have a younger spouse or you're the younger spouse, you need to get on title now. It's okay to add people to title with a reverse mortgage, but you cannot remove your name if you're the borrower. Okay? You could take your wife off title, if you ever wanted to Steve, but you have to remain in title. And then you have to continue to live there as your primary residence as well.
And as long as those are done, you're good. I'm going to help this person who did his loan years ago, to get his wife ... He doesn't understand how to file a quick claim deed and things of that nature so I'm going to help him get her back in title. Now, in your case, you did the reverse mortgage mainly because you're thinking of retiring soon. Is that the case? Or?
No, not really. Again, back to that comment about needs. We're just looking at things that we'd like to do, like there's ... we've done incredible amount of remodeling and refinishing on the house but there's one more big project we'd like to do and it's probably not a heavy hitter in terms of some of the other things we've done, but yet, here are the funds to do it without going outside this particular box and looking at other types of loan situations, homeowner type loans, HELOCs, those types of things. And you'd still get to use the primary entity, which we haven't used the word that much so far, is equity. Put that equity to work. Unlock that equity. As someone also said here behind the glass.
I'm giving you full credit this time, Steve.
Okay. Thank you.
Yes, it allows you to unlock that equity and you can tap into it and not have to worry about the payments. Was that ... Did you actually sit down and compare a reverse mortgage and you've got a line of credit available, but did you compare the reverse mortgage line of credit to a home equity line of credit you'd get at a bank?
Well, we had recently, in the last couple of years, done a, again, major upgrade, which is basically install air conditioning in a house that had no air conditioning, had no vents or duct work-
To go ... The scope of that project was rather large and we did a HELOC through our credit union. But I didn't simply want to repeat that because I thought these advantages, they were clearly on the side of the reverse mortgage instead of doing another HELOC.
Exactly. For you ... And you plan to stay in your house?
At least another eight to 10 years.
Good. That's good. If you have questions, my name is Bruce Simmons. I'm the Reverse Mortgage Manager with American Liberty Mortgage here in Denver. And
you can call me directly at 303-467-7821. 303-467-7821 with any questions if listening to this conversation sparks a thought in your mind and you have
a question, give me a call. Or visit me online. See what you can do, like Steve did, and do some research online before you call. And I'd be happy
to talk with you afterwards. I always want to work with educated ... people who are educated about the reverse mortgage program. And I think that that
just makes it easier. I don't want ... I've had loans where people have said, "Well, it's okay. I trust you." No, I don't want you to trust me. Trust
yourself. Do your homework and that way you know that I'm not going to rip you off, but somebody might. And you shouldn't do business that way. Do
Visit me online at reversemortgageradio.net. Reversemortgageradio.net. I've been doing reverses now for 15 years. That's the only kind of loan that I do. And I'm talking with Steve, who just recently closed his loan a month or two ago in regards to the reverse mortgage. And he's been kind enough to join me in studio here today. Do you mind me asking what your plans are for the future then Steve, as far as work or travel or ...?
Well, there's been all kinds of different things going on in my career. Basically started, commenced the second career back in 2012 and that's kind of marginal success based on the industry that I have chosen as that second career. There was some variables there in terms of finding the type of work I was looking for in that particular industry. And by rights, basically right now the only real opportunity is part-time, which was a little painful to a degree. And learning how to live with that but things have changed. I had X amount of years in the airline industry. I had a pension that was sitting there waiting for me to start taking it and that kind of helped make up the income that I was really looking for, to enable me to stay with this second career. I guess I would call myself, because of the part-time, I would call myself, classify myself as partly retired. I don't know how to best put that into words.
No, I think you did great there. Now, one of the things that people a lot of times do with reverse mortgages is they'll get a reverse mortgage to help maybe pay off some debt or cover some costs so they don't have to start tapping into their social security at age 62. Was that a consideration in your situation?
Absolutely. My, again, back to my finance guy, before I'd made a decision to go with the pension, taking social security early was a thought. A former co-worker in the airline, oh, he swore by that. "That's definitely the way to go." Well, my finance guy basically threatened my with my life. He said, "Don't you dare touch your social security at age 62." Again, that was everything you just said in your last comment there, we were, based on our needs again, go back to your needs, the certain amount of income that you were looking for but paying off some existing debt. I already talked about the house project, another remodeling or refinishing issue with the house. Plus we're also looking ahead to doing something for a big anniversary that's coming. All these things are tied back to the method that we chose to use with our reveres mortgage, in terms of taking this income.
Tying your needs and wants to the product.
And it works great for you. See it doesn't work for everybody, but for those who it does, it makes sense. It just ... you can't say reverse mortgages are good or bad. It depends. That's my favorite answer. It depends. And in your situation, it works perfectly. But, one of the things too is that you're not in a desperate situation, right?
So many people think that this should be a last resort. It should be to save your house from foreclosure or you're running out of money now and it's time to start using the equity. You never want to touch your equity unless it's a last resort. And that's not today's reverse mortgage. At a time when I first got in the business in 2003, the majority of people were just living on social security. They didn't have, maybe a pension, they didn't have $300,000, $400,000, $500,000, $600,000 in their IRAs or a fund that, an investment fund. Nowadays, it's not uncommon for me to do a loan with a small advance for somebody who might have a few hundred thousand or even a million dollars in an IRA account or 401K plan. And they don't want to start tapping into that just yet. It makes a lot of sense for people.
I was talking to my finance guy a couple times over the last several months. And when we were discussing the reverse mortgage and stuff and I said, "This is this hugs amount of equity just sitting there based on yes, I've been in the house a long time and yes, I've a mountain of equity." But there's so many things out there and I can remember when 401Ks were first beginning to be offered but they were so up front. Okay, you can't touch this without substantial penalty. In other words, the word they answered to your ... "Can I use some of this?" "No. No, no, no." And again, in the most recent discussion was, "I'm tired of being told no. And with this equity stuff and being able to use it in this manner is just it's not a matter of nobody is telling me, 'No, don't do it.' This is an option. You're just not going to get hammered or penalized for using it smartly."
Obviously there's probably the situation where someone out there went out there, took their reveres mortgage in a lump sum and did something less than stellar with it and is paying the price. But, it all comes down to the individual. Again, with those needs and your own disciplines of how you manage money, how you think about money and that kind of stuff.
That's a very good point because yes, there are some people who will, they'll get the reverse mortgage and then they blow the money. It's amazing how many kids, adult children, will milk their parents dry. I've seen it over and over and over again. Parents using the money to bail their kids out of jail or whatever the case may be. And if you're that type of person or a big spender, then you might want to still do a reverse mortgage. You can still do it but we could set it up to where you're receiving a monthly income. So you can budget and you have a budget and you have to live within that budget. And in that situation, then maybe your financial advisor or even I, I would tell you if you're that type of person, set it up this way so you can take it out just on this little bit at a time. And don't take more than what you need because people will blow their money sometimes. And that's one of the downsides with a reverse mortgage is people think suddenly they're rich. And then they spend all their money and now they don't have the money or nearly as much equity.
They're going to have a lot of equity still because we only loan, we typically loan between 40% to 60% of the value of your home. The younger you are, like in your situation Steve where you're in your early 60s, you're getting 40% of the value. And you can can't blow all your equity. Even if you took all the money, as much money as you could up front and HUD has rules about how much money you're allowed to take in the first 12 months.
Safeguards. That's good way ... That's a better, softer way to put it. Not rules. Rules are strict and bad. Safeguards are good for you.
Keep that in mind. If you're that type of person. You say, "I don't want to touch that." We can help set it up so that you don't blow it too, as long as you're disciplined enough.
Steve, I have a quick question for you.
What made you choose Bruce over another reverse mortgage lender?
Wow. Well, maybe even before he started doing his show here on KLZ, I guess I had gone out to him once before at the point where he said, "Oh, I'm sorry. You're not 62 yet. You can't play." But I just got a sense that he was really committed to it and obviously he's been doing them for what? 15 years?
15 years. He's going to know. He's going to definitely be working in my behalf.
Thank you. Okay.
Yes, I do try to work on my customers behalf. And I stay in touch with people. Like if you call me and you want to gather information but you're not ready to move forward yet, I'd be happy to give you some information. I got a call just this week from a lady that I first started talking to I think in 2013. And she's now ... she called me and she said, "I think I'm ready to start moving forward with this." Now, she thinks she's ready to start. I said, "Okay, we'll set up a time to meet and I'll come out to your home." And she has some health problems so I'm going to her. And I usually do go to people's homes. That's the majority of my calls. And I go out anywhere. If you're listening to me in Fort Collins I'll come to you. Or if you're listening to me in Parker or Castle Rock, wherever, I'll come to you. And if that's what you want.
That is true.
Yep. Yeah, that's right. I came to your place there and we work around your schedule. If your spouse or you work until five or six, I can come in the evenings.
Things of that nature. I try not to make it out to people's house on the weekends. But if need be, I can.
Another thing, Mary, since you asked, he's got great people working for him. Can I talk about Mary?
Oh, yeah. Please.
Mary, I ... Mary's one of his assistants and she's like a dog with a bone. We were looking for a certain piece of information from one of the entities in the process and for whatever reason we just couldn't get it. Another week would go by and it was holding everything up. And I'll tell you, Mary, she led the charge big time.
She does that. One of the things that we have to do is we have to verify pension award letters. We have to verify HOA payment histories and insurance payment histories. It's kind of a pain in the neck. But these are the rules, the safeguards, that we play with now. And Mary is my assistant. I should have her back on the show here soon.
Yeah, she was great that one time you brought her on.
We'll have to talk about it. And maybe I will. I'll go into more detail about the process, what we have to got through to get you approved. And the challenges that there are involved with a reverse mortgage these days because it's a lot more than it used to be unfortunately. But that's the way it is. That's government. It's a government insured loan. And we have to play by their rules. And some of them are safeguards, some are rules. But, that's one of the things. And my assistant, Mary, she is fantastic at staying on topic. She will, like you said, a dog with a bone, she will continue to fight to get the documents that we need as soon as possible to get the loan approved. And that's one of the great things about being in the business.
Number one is customers. I love the customers. The people I work with at American Liberty Mortgage, Mary in particular because she's my assistant, but everyone else from the owner of the company to other loan officers to other processors, we've got people in Florida too. We're closing a loan for one of the loan officers there in Florida, a reverse mortgage. We can do reverse mortgages in Florida, if you know somebody there or you're here visiting and listening to the radio. If you have a parent that lives in Florida, let me know. We can certainly help them there. But, that's one of the things is working for a great company that's been in business, they've been in business since 2003 as well.
Thank you Steve for coming here today. I really appreciate your time. It's been fantastic and enlightening.
Well, thank you. When you first asked, I didn't even think twice about it because i just realized what a great opportunity is was for us but also great in working with you and Mary to get it done and just worked out so well.
Well, good. My direct line, if you have questions is 303-467-7821. 303-467-7821 is my direct line. My name is Bruce Simmons and I am the Reverse Mortgage Manager with American Liberty Mortgage right here in Denver. Also, visit me online. You can see video testimonials and maybe, I don't know if Steve'll do one or not, I don't want to push our relationship, but since he was so kind to be here. I've got video testimonials and other things on there that you can certainly check out, frequently asked questions. But visit me at reversemortgageradio.net. Thanks so much for joining us today.
Call Reverse Mortgage Specialist Bruce Simmons of American Liberty Mortgage directly at 303-467-7821 to being 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 and MLS number 409914, regulated by the Division of Real Estate.