Mortgage Options for the Elderly
Reverse Mortgages Have Changed
As people age, financial goals change. People often wonder how they can get the money out of their house, or, how to have as low of a monthly payment as possible.
Michelle Moses is joined by Jud Holmes, mortgage broker, to discuss mortgage options tailored specifically for seniors (62+). They discuss everything from reverse mortgages, paying off your house, to the benefits of family opportunity mortgages.
Time Stamps
00:00 Welcome to the Financial Podcast: Focus on Senior Lending Options
00:32 Introducing Judd Holmes: Expertise in Mortgage Solutions
01:35 Exploring the Family Opportunity Mortgage
06:18 Understanding Reverse Mortgages: An In-depth Discussion
15:46 Understanding Reverse Mortgages: Inheritance and Repayment
16:46 Navigating Reverse Mortgage Audits and Compliance
17:16 Ideal Candidates for Reverse Mortgages
18:24 Exploring Financial Flexibility with Reverse Mortgages
19:10 Strategic Uses of Reverse Mortgages in Financial Planning
21:56 The Costs and Considerations of Reverse Mortgages
25:10 Involving Family in Reverse Mortgage Decisions
26:46 Concluding Thoughts on Reverse Mortgages
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Welcome to the Financial Podcast: Focus on Senior Lending Options
Michelle Moses: Hello and welcome to the me financial podcast. I am Michelle Moses, your host. I am a certified financial planner, realtor and former e commerce site owner. And today we are going to be talking about lending options for the senior people in our lives, whether it is your parents, your aunts and uncles, or maybe yourself.
Introducing Judd Holmes: Expert in Mortgage Solutions
Michelle Moses: Um, and today to talk about this, I have Judd Holmes and he is the owner of Innovate Mortgage, a local Phoenix mortgage brokerage since 2018. He has been a loan originator since 2002 and works with all types of residential buyers, whether it's primary residence, second home or investment properties or refinances like what we're kind today.
So welcome.
Jud: Absolutely. Thank you for having me. It's great to be here.
Michelle Moses: Yeah. Judd and I have known each other for a very long time and, um, we have [00:01:00] lots of laughs. And so I thought it would be great to have him on here. He knows so much about mortgages and can just. Like spit it out. Like while you're at the bar, , I'm almost always at the bar.
Yeah. . Well, you know, your stuff backwards and forwards. So I am excited to talk about this. Uh, we are gonna be talking about a couple options for, um, elderly parents out there, and one is called the Family Opportunity Mortgage, and then the other one. That's going to take up more of the bulk of the time is going to be reverse mortgages because those are, uh, a little bit more complicated.
Exploring the Family Opportunity Mortgage
Michelle Moses: So let's start out with the family opportunity mortgage. Now this one is really new, correct?
Jud: Well, actually it's, it's been around for a while, but there's been, there are other types of programs that you can, they can do for the, uh, Similar to the family opportunity mortgage. I've never actually done the family opportunity mortgage cause there's been other programs that I've used that, that were more beneficial in certain circumstances.
Michelle Moses: Really? So it was like the rate more beneficial or something like that?
Jud: [00:02:00] No, it's a, the family opportunity mortgage is essentially the, Children can put a loan in their own name and get primary residence financing, which is going to be a much better rate than a second home or investment property. And they can do that and they can let their parents move in.
What I've always done in the past is really just having the kids on as non occupying co borrowers so the parents are still on the loan, still on title. And all we're doing is using the kid's income to help qualify. Okay. They essentially do the same thing. The way that I do it with, uh, with having the parents on the loan as well, is it, it, uh, gives them, it puts them, puts it in their credit in addition to, in addition to the, the kids that are on the loan.
And you can flip that also and parents can do it for their kids also.
Michelle Moses: Right. Yeah. Okay. And I mean, you could do that. Yeah. I mean, I guess with a young kid starting out, that's how you might do something. Right. And it's the same thing with an elderly parent. And so with, cause I get a lot of questions, um, [00:03:00] when parents are getting elderly and it's mostly when they're kind of running out of money or they're worried about, Hey, they, You know, they might need some long term care assistance or just help.
Um, and what people want to do is they often want to buy their parents house. And I have to tell you that I think 99. 9 percent of the time I say no, because you can inherit their house and not pay a dime and you will get it up at the same price. elevated cost basis. So, but if they are co buyer on the loan, they're all still owners, right?
And so they would only get a step up in the cost basis on like 50 percent or whatever percentage of the house. Or do you have any idea how that works?
Jud: Um, I'm not sure that how that works, but I think you're correct. Like if, if they, if the. Parent passes away and they inherit the house, then obviously you get 100 percent uh, uh, uh, cost step base, uh, stepped up cost basis, which is, which is more beneficial than buying it from their parents.
So that, that makes perfect sense. As far as them going on the loan with their parents, I don't know how that would work. Yeah,
Michelle Moses: I think that would mess up the, [00:04:00] anyway, so yes, but, but the family opportunity mortgage would also mess that up. So that, you know, that's kind of off the table with what we're talking about here at the beginning.
Um, but, um, just be aware that if you are putting your name on your parents home, then you are going to kind
So anyway, the family opportunity mortgage or what you're talking about is doing the co borrowers is an option for elderly parents and you would basically just get a better rate than you would because when you're buying a second home or investment property, you have a higher rate of interest that you are paying and these kinds of options will help get that down and obviously then get the monthly payment down.
Jud: That's correct. And also you, if you're a, if you're the kids in this scenario, you can't buy a second home in the same city that you live in. So you're not even allowed to do it. Oh, I
Michelle Moses: didn't know that.
Jud: No, because that's, uh,
Michelle Moses: okay. Yeah. So, yeah. So if your parents live in the same house, I mean, you'd have to buy it as an investment property.
You'd
Jud: have to [00:05:00] buy it as an investment property, which is going to require a minimum of 20 percent down and, uh, and. And the rates are, the rates for second homes and investment properties are pretty close. They used to be a pretty big gap, but second homes are slightly better than investment properties, but they're both considerably higher than primary residence.
Michelle Moses: Okay. All right. I didn't even think about that. Yeah. And then with a family opportunity mortgage, you only have to put 3 percent down.
Jud: You can put as little as three. Right.
Michelle Moses: And then you get a better rate too. And so it'd be the same thing if you were doing the co borrower thing that you were talking about, you only have to put 3 percent down on certain houses if they qualify.
Jud: Exactly. And obviously
Michelle Moses: there's always a caveat.
Jud: And one of the benefits for doing the co borrower option is usually if you have children, and let's say that they're 19 years old and they've had a credit card for, uh, you know, at least six months and they've got a credit score. If you put them on as a primary borrower, even though they don't have income, the parents can be non occupying co borrowers.
And now you're not only helping buy a house, let's say that you buy a house for them near a college and they live in there for four years. You're not only helping them buy a [00:06:00] house and a place to live. But it's also going to help them build more credit because now they've got a, you know, when they graduate college, they'll have four years of good mortgage history on their credit.
Okay. So there's, there are other, uh, benefits that are not readily seen, uh, by being a non occupying co bar.
Michelle Moses: Right. Okay. All right, cool. Okay.
Diving Deep into Reverse Mortgages
Michelle Moses: So the other one that we're going to talk about is reverse mortgage, and It's going to take up the bulk of our time, um, because I think that these are becoming more popular because we all have lots of home equity and, um, what's happening is that the returns of cash, I wouldn't say short term cash, but a lot of like stock market returns and things are becoming anemic or have been, and people are wanting to tap into the, um, equity that they have in their house.
Um, I've been getting more and more calls about reverse mortgages, so I thought it'd be a good topic to have. Um, I don't even know where to start. I think people know, they know them and then they say, okay, I know to stay away from them because this is the way that they, they picture it as you're signing your house [00:07:00] away over to the lender and you are basically never going to make a payment and no matter what, then the lender is going to get your house.
And that just is not the case. Anymore?
Jud: Uh, never was the case. It never was. Okay. Yeah, no, that, that's just, uh, it's just gotten bad PR over the years. Okay. No, the All right. The, there, there has been more regulation in recent years so that the people that are getting the reverse mortgages are required to understand it better.
They actually have to go through a counseling phase, uh, during the process with somebody that. Not recommended by me. It has to be an objective sort of third party that, that goes through the counseling with them so that they understand everything. And so, um, once people understand the, the pros and cons, then they make the decision on whether it's the right thing for them.
And it's not, and it, if for the most part, it's, it, there's a lot of people that it's, it's totally need based. Like if they have, uh, You know, if you have somebody that has a 700 per month mortgage payment right now, and they're on a fixed income of like 1, 400 a month, [00:08:00] you know, they don't have a whole lot of money left over at the end of the month.
Michelle Moses: Right.
Jud: And if you do reverse mortgage, you first of all get rid of that 700, uh, mortgage payment. And also you can have them getting. Monthly cashflow every month from the reverse mortgage. So you might, uh, you might get, get rid of the 700 payment and 400 coming in. So now you've just, uh, given them an essentially an extra 1, 100 per month of money to spend.
Michelle Moses: Yeah. And you're allowing them to live in their house. They're still owning it. They're still on the title. You still have the option to never get rid of that house if you want, correct? And, um, you're freeing up some cashflow. And that's when I've seen it too, is, um, when cashflow is tight for seniors, uh, and they are worried about, you know, they need money to put on a new air conditioner and some of that stuff just starts to add up.
So let's start at the beginning, whereas. is a big factor in reverse mortgages, correct?
Jud: Yes. First of all, you can't even get one unless you're at least 62 years old. [00:09:00] Okay. So that's the starting point for a reverse mortgage. So, so you have to be sort of of retirement age, uh, Or are we getting close to, uh, retiring?
Uh, you have to be over 62 to be able to, uh, to even qualify for reverse mortgage.
Michelle Moses: And are they even, are they better if your house has paid off or not paid off? Or have you seen it? I mean, it just, it's, they're just better if you have more equity, essentially. The more equity you have, the better. Yeah, right.
Cause it's just more to tap into because you're basically the, the reverse mortgages, refinancing, whatever you have. and paying off that loan. And so obviously if you have more equity than, you know, you're in less loan amount, then you've got more to live on.
Jud: That's correct. We were talking about an example earlier.
If somebody has a 400, 000 property that's free and clear, depending on their age, let's say that they're 70, They can probably get about 160, 000 out of that property on a reverse mortgage. If they owe 100, 000, then they can probably only get about 60 out of it. Still good. Uh, but [00:10:00] they, uh, the more equity you have, the better, obviously.
Michelle Moses: Right, right. Okay. And, um, so the way that this works is, so let's continue with the 400, 000. Let's pretend that it is, um, paid off. Okay. Uh, and you, you, uh, Because the loan devalue, how much the company is going to give you depends on how old you are and that because of the loan devalue. So the younger they are, the less the loan devalue, correct?
Jud: That's correct. And a good rule of thumb is take their age and subtract 30 from it and that's the loan devalue. So if you're 70 years old, subtract 30 from that, 40 is the loan devalue. So we take 400, 000 value. Times 40%, 160, 000. That's where I came up with that number. Okay.
Michelle Moses: Yeah.
Jud: All right. I'm not a genius.
I just,
Michelle Moses: it's just a trick. Uh, and does, does the loan to value depend on the rates of the market? You know what I mean? So like if, since rates have gone up recently, so now are the loan to values kind of. It's [00:11:00] depleted and now it would be more like 37 percent instead of 40 percent or something like that.
Jud: Right now it's around 31 percent so you take, I'm sorry, you take about the borrower's age minus 31 approximately right now, it used to be 29 because the rates have gone up. And so since rates have gone up, the amount that you can get it out has gone down, gone
Michelle Moses: down. Right. Okay.
Jud: So with rate elevated rates where they are right now.
That, that 3031 is correct as of right now for today's rate, uh, when they're lower a few years ago, you probably could have done their age minus 27 or 28.
Michelle Moses: Okay. All right. Okay. That makes sense. And so the way that people need to think about this is that, um, Again, you still own the house, you're still on the title, but the money that you are taking out or your payment.
So let's pretend they don't even take any money out. So I have this example where they don't even need the cash really. And, um, but they just want to not have a payment. So essentially what happens is [00:12:00] that you refinance into the reverse mortgage and, um, you pay closing costs. Correct. And those can be like, or usually like 17.
I mean, I guess it depends on the size of the loan, right?
Jud: Yeah. It's based on a percentage of the loan. So the, on a, on a 160, 000 loan, the, uh, there's going to be 3, 200 that just gets added to the loan right away. And then there's 6, 000 origination fees, and then there's appraisal fees. So it is fairly expensive, uh, as far as closing costs.
So you need to make sure that. You're going to be in the house for a long time to make sure you're going to get some benefit out of it. Right.
Michelle Moses: Right. You don't want to do this and then move three years later because you would have paid all these fees to people to do the loan is the way you need to, the way I think about it anyway.
Um, and cause you're buying a product. And so if you're only there for three years, it's not really worth it.
Jud: I think most people, if you probably want to have at least a At least a five year time horizon. Mm-Hmm. , uh, before you even consider it.
Michelle Moses: Okay. Yeah. All right. Yeah. So if you have elderly parents and you're not sure if they're gonna be moving into a home or something like that, this might not be an option.
If you know, or if there's stairs [00:13:00] and you're like, yeah, no, they're not gonna be staying here, then it. This is not worth the fees that you would be paying.
Jud: That's correct. That's, that's the first conversation I have with people. I want to make sure that they're even a good candidate for it. Cause if, if they're going to be there for only a couple of years, then, uh, then we're done with that conversation right off the bat.
And then it's time for other options. Yeah. Different options. Okay.
Michelle Moses: Okay. And so then basically what happens is you close on it and there's a certain rate of. Uh, just like you would have for your normal mortgage, but that is being added every single month correctly to your balance. So the balance is growing.
Jud: That's right. Okay. So if you started off with a zero balance. All those closing costs get added in. So let's say you start with a 15, 000 balance, something like that. So each month, whatever the interest is that accrues, gets tacked on to your mortgage. Okay. So if you start with 15, 000, then it goes up 1, 000 a month or whatever like that.
It sort of depends on all the different parameters of the interest rates and things like that. But yes, over time, your balance is going up. At the same [00:14:00] time though, there's a line of credit that also increases At roughly the same rate as the accrued interest. And so that line of credit that you, if you didn't utilize any of it at, at, at the closing, that's a growing line of credit that you can use.
And so you can, it's, you don't have to take it in terms, in terms of monthly payments. You can let that accrue. And, uh, you know, if you take it at one time, it goes out, right. It's a pool pump or something like that. Then you can access that to pay for stuff, but no, but, but you don't ever have to pay for it.
Right. I mean, so you're, yeah, you can use that to pay for the repairs, but you don't have to actually write a check out of your check in your savings.
Michelle Moses: Right. It's just there. So I think that when you do a reverse mortgage, there's kind of like what I'm picturing is like two buckets. You've got one that's the loan that's growing, and then you've got one that's the home equity line of credit that is also growing along with your loan.
Um, and so I think people's fears are that the loan would start to grow. Right. And then the parent passes away. And then the loan is, so this [00:15:00] 400, 000 example, um, let's pretend they used 100, 000 of their cash and now their loan, you know, they lived in it for 20 years and I don't know, the loan is what, 150, 000 or something?
Jud: Yeah, let's go back to the original example. If they started, if they started with, uh, um, Zero balance. They didn't, they didn't take any money out at closing. So they just started with like, you know, 15, 000 balance on the, on the mortgage. And that at the end of three years, that thing is going to accrue to 45, 50, 000.
So the house still worth 400, 000 plus. The reverse mortgage can be paid off by the kids and they can continue to own the house.
Michelle Moses: Right.
Jud: So,
Michelle Moses: uh, Is there an instance where you have the reverse mortgage and the parents pass away and there's still a lot of equity?
Exploring Reverse Mortgages: Inheritance and Repayment
Michelle Moses: Could they just like get a lot that, I mean, they would just get a loan, right.
And just pay it off and just buy it. Well, I guess not because they inherit it. How does that work? Well,
Jud: if they, if they inherit the house, they, when, when the, uh, when the senior passes away, the [00:16:00] kids have a couple of different jobs and they can just sell the house and it will pay off whatever's on the mortgage at that time.
Right. And they'll just keep the money or they can. They have to pay off the balance to the mortgage, like if they want to keep the house for sentimental reasons or for investment property reasons, they can keep the house, they just have to pay off the mortgage. Once the senior no longer lives there, as a primary resident, the mortgage does have to be paid off, the reverse mortgage does have to be paid off.
Michelle Moses: Right.
Jud: And if, uh, as an example, if somebody's in the house and then they go to, Like the hospital or some sort of extended care for five months and then they come back. Well, that's okay If you're gone for more than 12 months from the house, then that triggers the the need to pay off that the reverse mortgage So 12 months is sort of the okay the number of how long somebody has to be out there or upon death
Michelle Moses: Okay, I mean I have to ask this.
Understanding Reverse Mortgage Audits and Compliance
Michelle Moses: How do they know if they've been out of there for 12 months.
Jud: There's regular audits
Michelle Moses: Oh, there are so they like drive by or
Jud: I
Michelle Moses: believe that
Jud: they just, I, I don't know exactly know how, but I think they actually just called and verify and, and, you know, [00:17:00] they check and make sure that people are still living there.
Michelle Moses: Oh, okay.
Jud: Make sure the borrower is still living there.
Michelle Moses: Right. Okay.
Jud: Yeah. All right. I'm not sure. I'm not sure exactly how they do that, but it is done.
Michelle Moses: Okay. So they're doing audits to make sure so that you're not, they're not getting swindled basically. Yeah. Okay. Yeah. Okay. All right. Well, that's good.
Ideal Candidates for Reverse Mortgages
Michelle Moses: Um, and so do you feel like there is, what do you feel like is a special, I mean, do you, what are your overall opinions of reverse mortgages?
Because it's like, I have, you know, annuities, I have an overall opinion. Do you feel like these are a good for certain people? Like what is the ideal client that you feel like this would be great for?
Jud: Well, there's the need based, uh, client and, uh, That's, that's the typical one that people think of where the person only has a certain limited fixed income.
That's not going to change. Right? And so
Michelle Moses: they need to alleviate a little bit of their monthly.
Jud: Yeah. So if they've got 1, 200 per month, this is a specific example of somebody I worked with. Their husband passed away, so they lost the income benefit from [00:18:00] their husband, and so now they were only receiving like, I want to say 1, 200 a month for social security, and their mortgage is 700 a month, so she had 500 per month to live on, and that's obviously not enough in today's day and age, and so we got rid of the 500 payment and started bringing in 600, And so now she just has 1, 100 more per month to live on and
Michelle Moses: plus a home equity line of credit
Jud: plus the line of credit continues to grow.
Okay. Yeah.
Navigating Financial Benefits and Interest Rates
Michelle Moses: And so when the, and then when you take the money on the home equity line of credit, is there a separate interest rate for that, that they're charging? Does that make sense? Or you're just taking it. That's just part of built into the loan.
Jud: Yeah. So if, if your, if your balance on the mortgage is 50, 000 and you need to take 20 grand out, well now the balance is 70, 000.
Michelle Moses: Okay.
Jud: So it's just, it just moves from one side to the other.
Michelle Moses: Okay. Oh, all right. Yeah. In my head, I got these two different buckets, but it's more like, it just goes to the other side. Yeah.
Jud: If you've got, if you've got 27, you know, if you've got 100, 000 available on the line of credit [00:19:00] side, and your mortgage balance is 50, 000.
Well, you take 20, 000 from the line of credit side and apply it. Uh, added to the merge and then that's 20, 000. You, you, you basically can spend,
Michelle Moses: right? Yeah. Okay.
Strategic Uses of Reverse Mortgages in Retirement Planning
Michelle Moses: And I feel like if you were buying the home and you knew that you were thinking that this was like your last home, I mean, I could see people buying with, you know, they've got all of this cash, they're ready to retire.
They're going to buy a one level, um, home, you know, patio home or something that they just buy, do it with a reverse mortgage. Right.
Jud: They can do that or if they, if they want to pay cash and then do a reverse mortgage afterwards, the numbers work out the same. They do. So it's, it's up to them how they want to do it.
Okay. Sometimes, sometimes sellers would prefer a cash buyer versus somebody that's doing a, any kind of mortgage. Right. In a competitive situation, if you've got enough money to pay cash for the house, then yeah. And then you can do the reverse mortgage afterwards if you decide that it makes sense.
Michelle Moses: Right.
If there, if you wanted to tap into it basically and get the money. And so do you think it would be better to do a reverse mortgage? Cause if they pay cash for it, then [00:20:00] they could just go get a home equity line of credit. But those are like 8 percent right now. I
Jud: mean, Well, and that, uh, if, if you wanted to just have access to a line of credit and you have plenty of income, then that's probably a great idea because there's very little, there's very few fees on a traditional line of credit.
So if you just want to get a line of credit after you move into the house, just to have a, have it available, that's great. Just remember that once you use the line of credit, you have to make a monthly payment on it. Right, right. That's a, that's called a forward mortgage, meaning you have to pay the monthly payment.
on that. But if you don't ever want to make a monthly payment, then you can get a reverse mortgage.
Michelle Moses: Okay.
Jud: But yeah, if you're, if you're just, uh, if you just wanted to have it there for a rainy day and you've got plenty of income, you should not do a reverse mortgage because the fees don't make sense. Yeah.
This
Michelle Moses: is a reverse mortgage. You want to stay in your house and you just really want to eliminate a monthly payment.
Jud: Exactly.
Michelle Moses: Correct. Okay. And I think that's the way that we can really simplify this is doing that. And that,
Jud: that's, that's the, that's the traditional one we think of is the people that, that have needs based, uh, for it.
But there are, there are some. more sophisticated, uh, [00:21:00] investors, because when you take the, when you receive money from a reverse mortgage, it is not income, right? You're borrowing it.
Michelle Moses: Right.
Jud: And so if you want to delay taking social security because your benefits are going to go up in five years, you could use a reverse mortgage to delay taking your social security because your social security is going to go up, or if your pensions are going to go up.
Right. So if you want to use it to sort of delay taking some other asset or delay selling other financial assets, because. You're going to have long term capital gains or something like that. Yeah. There's, so there, there are other, that's a
Michelle Moses: great idea.
Jud: Yeah. There's other, you know, more sophisticated versions of this.
It's just the one that most people think of as somebody that's, that's heavily in need.
Michelle Moses: Yeah.
Jud: Uh, but, but the, the financial planners of the world are starting, are not starting. I think a lot of people have been doing it for a while. They, they understand that there are maybe some, some situations where even somebody that's very well to do might do a reverse mortgage just because, you know, It would prevent them from having to sell some other other assets.
Michelle Moses: Exactly. And that's where I have heard it too, is that they just want to do it.
Comparing Reverse Mortgage Fees to Traditional Mortgages
Michelle Moses: And so are the fees in a reverse mortgage, are they [00:22:00] exponentially bigger than a regular mortgage or are they all about the same?
Jud: No, they're quite a bit higher.
Michelle Moses: They are? Like a lot higher?
Jud: Yeah, because it's, it's going to be 2 percent of the, The loan amount gets tacked on to your, uh, to get sacked on the mortgage right up front.
And, uh, and then also there's like 6, 000 insurance, mortgage insurance. It gets added on also because it is an FHA product in most cases. Uh, so. There are some jumbo products, which are a little bit different, but we're kind of sticking with the FHA version of it right now,
Michelle Moses: right? Right. Yeah.
Jud: So there, there are fairly high, uh, closing costs.
So you, again, that's why you want to have it for
Michelle Moses: a long time and just know that this is kind of your retirement plan and you're going to be in here. Um, and then your kids do have the option to buy the house. It's not like, and I think that was, the biggest surprise when I was revisiting this because, um, I think when you start out in your career, you know, you kind of learn about things and then you're like, no, no, no, no.
And so now I've been revisiting this over the last year or so. And, um, I was surprised [00:23:00] that the title stayed. And I just thought that once you had a reverse mortgage, the bank. owned it at the end, like kind of no matter what. So still
Jud: in your
Michelle Moses: name. Yeah. So it's still in your name. You still have full control.
You could still actually get one at 62. And then if you decide to move at 80 somewhere else, you could just sell your house and then take whatever was left. Right.
Jud: Absolutely. And there are rare instances because like in 2008, when, when a lot of house values went down a lot, people that had reverse mortgages had a line of credit available.
on a house that was underwater. And I heard an example of somebody that took, took like their line of credit of 300, 000, paid cash for a house and then tossed the keys to the bank and said, here's my house with a reverse mortgage. That's now 600, 000 underwater. See you later. Right. And so, That's a rare circumstance.
It is great for them, right?
Michelle Moses: It worked out good for them. And that because what you're doing basically with the reverse mortgage is you are assigning the risk over to the bank.
Jud: Right.
Michelle Moses: Right. Yeah. Versus us taking regular mortgages, [00:24:00] you know, they are taking the risk, but they're getting the interest for it.
And they're, yeah. Yeah. And
Jud: they're, and they're getting, they're getting paid plenty of interest on, on the first couple of years. Yeah. They, they do. Uh, the longer that somebody is in a reverse mortgage, probably the better because you're, you're accruing that line of credit for a long time. And yeah. And, and you could end up like that situation in 2008 where the person actually had a higher line of credit than was even available on the house based on, based on current values.
Cause that line of credit goes up even if the value of the house doesn't go up.
Michelle Moses: Oh really? Yeah. Okay. I think that's a good planning.
Jud: It goes up as a, it's a, it's a, it's a formula. It goes up at the same. Basically the same rate as the low. Okay. Yeah.
Michelle Moses: All right. No matter what, it's not like, because in 2008 and nine, you know, they were taking away our home equity lines of credit.
Cause the houses weren't.
Jud: Yes, but they can't take away a reverse mortgage. Right.
Michelle Moses: Okay. All right. I think that's a wonderful little planning thing right there.
Jud: So if, you know, if you, if you, if you think that the, Okay. housing market's going to crash. Yeah.
Michelle Moses: Then go get, go get yourself a reverse mortgage [00:25:00] today, everybody.
Jud: Well, you obviously need to check all the other boxes. Yes, I know. But, but yes, if that's the cherry on top, then yeah. Right,
Michelle Moses: right. Okay.
Involving Family in Reverse Mortgage Decisions
Michelle Moses: Well, do you feel like we're missing anything? I think, I feel like we've kind of given like a brief overview of options for seniors and for the reverse mortgages.
Jud: I think, I think we've covered everything when I, when I meet, because I know, I understand that.
Kids don't want their parents to be A, taken advantage of, or B, uh, A lot of them are looking at that house as a future asset of theirs. So whenever I do a reverse mortgage consultation, the first one I do, I, I, I talked to the senior and make sure that it could be a potentially good idea for them. And then the next meeting is the senior and the kids in person.
to make sure everybody understands it, because I don't, I don't ever want somebody to think that, that, uh, this is not the right plan. Right. And so when, and when you explain all of it, the right way, they're, they're like, oh, that's kind of expensive. And they're, but they do understand the [00:26:00] upsides of it. And so it's, it's just, it's important to get the whole family involved as early as possible if you're going to do it, I think.
Yeah. Because you don't want to, you don't want to have to, uh, you know, have, you know, Reexplainer. Exactly. Yeah. Yeah. Well,
Michelle Moses: and I feel like once parents get older, there's a trustworthy relationship with the kids and you know, all of that and the kids know what the succession plan is. It really becomes like one big pool of money.
Um, and so you kind of are all managing your money together. Yeah. So it's, in my experience, that's kind of what happens. So, yeah.
Jud: And I'm going to leave these, these, uh, guides here with you. So if anybody has specific questions, you know, you can refer back to it or of course you can send them my way and I'd be happy to answer their questions as well.
Michelle Moses: Yeah. And Judd's information will be in the show notes. We'll be, um, linking to his website with his phone number and everything like that. If you are wanting to get in contact with him and, um, let us know if you have any questions or anything, you feel like we covered everything.
Jud: I think we've covered enough.
Okay. We don't have time to cover everything. Yeah, we don't need to get into the. Yeah. Or you want, is there something else you want to say? [00:27:00] No, no, no. Off the top of my head. I think we've gotten through the basics that, uh, it, you know, understand it can be beneficial in certain situations. And, uh, and I think knowing when it's not beneficial is, is just as important.
Like I said, if you're not going to be in very long, then that's not the thing to do. It's not going to benefit you then. And you shouldn't, uh, you shouldn't be involved in that.
Michelle Moses: Yeah. I mean, cause like any financial product, when you're buying a product, you're paying a person and you're going to pay some fees.
And so you need to make sure, I mean, like you're buying life insurance, annuities, a reverse mortgage, uh, just make sure you're going to have it for a while so that the fees are worth it. Exactly. Yeah. Yeah. I think we're good. Okay. All right. Well, thank you everybody for listening and be sure to give us a review.
Um, subscribe and let me know if you have any other questions. We're happy to help. Thank you so much.
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