The Benefits of a Reverse Mortgage – Episode 115

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[00:01] Welcome to the Prosperity Podcast, fresh alternative personal finance talk for independent thinkers who prosper outside of Wall Street. Here’s your host, bestselling author, Kim D.H. Butler and No BS Money Guy, Todd Strobel. Hey everybody, welcome to another edition of the Prosperity Podcast. This is No BS Money Guy, Todd Strobel. Once again, have bestselling financial author and the principal at Partners for Prosperity, Kim Butler, with us today and we’re really going to be kind of, you know, once again diving deeper on a topic that we’ve kind of brushed a few times and that’s the reverse mortgage. There is so many people who react emotionally to this topic that they miss the facts and they miss the opportunities that we want to just take a minute, let you understand

[00:56] what it is, show you some of the potential from a financial strategy type view and see if maybe you’re making a quick decision when you should think a little more. Hi Kim, how are you? Very fine, thank you and so happy to be talking about this because it is a, as you identified, very emotional subject, but it’s also one that a lot of people don’t really have a lot of experience with or a lot of knowledge about. Of course, the media every now and then gets on their bandwagon and frankly doesn’t help things. So one of the first resources that I want to list and we’ll cover this a couple times is a company that’s available in all 50 states, most people are familiar with, called Quicken and they have a special reverse mortgage department and I want to

[01:47] list the phone number for that department and the thing that’s cool about it is that these reverse mortgage specialists at Quicken are salaried employees. They’re just there to help you and they’re specifically trained to work with prosperity economics advisors. That means they’re going to understand a little bit better the use of whole life insurance, they’re going to understand a little bit better the seven principles of prosperity and they’re going to understand a little bit better how to help you implement a reverse mortgage in light of those other things. So this is Quicken and the phone number is 888-500-721-0. That again is 888-500-721-0 and I’ll list that again here as we wrap up the

[02:40] podcast in a little bit so that you can write that down if it’s of interest to you. Again, Quicken reverse mortgage specialists and they clarify this is not forward mortgage specialists. I’d never heard that term before until they used it, but reverse mortgage specialists at 888-500-721-0 just for fun. They also do have a forward mortgage that’s like a regular mortgage where people take it out 30 year period, you know, work through it over time and I’ll list that 800 number as well in case people are interested and that is 888-559-9848. Again, 888-559-9848 and these are specialists that are trained to work again with prosperity economics advisors clients. So if you call them Quicken loans, they’re salaried employees that are

[03:37] there to help you and they understand the use of whole life insurance, they’re going to typically recommend 30 year fixed mortgages, minimum down, no extra payments, because of course, that fits within our seven principles of prosperity. But back to our reverse mortgage discussion, it’s interesting how many people will tell me in their 60s, oh my gosh, I don’t want to do a reverse mortgage, which is great. They shouldn’t be doing a reverse mortgage. I mean, I know there are advertisers available at age 62, but a reverse mortgage is one of the last strategies that you want to work with well into your late 70s and 80s because a reverse mortgage is calculated based on life expectancy. One of the other reasons that people typically

[04:22] don’t want to look at a reverse mortgage is because they don’t have life insurance on their own life. Now this isn’t going to work if you’ve bought life insurance on a child or grandchild, adult or otherwise, like adult child or or small child, either way, but if you have life insurance on your own life, then you can combine that with a reverse mortgage to get fabulous tax-free income and still create a free and clear home if that’s what your family wants. So let’s play this out a little bit. Todd, do we have kind of a fact pattern that we can work with? You think we have covered the basis clear enough so far? The only thing I want you to clarify is that, you know, your relationship or your company relationship with Quicken, was that a

[05:15] paid or an unpaid endorsement? That is unpaid. Thank you for asking. The only thing that happens in the relationship with Quicken is that you, as the client, get a $500 credit for using this advisor team and the reason that they do that is because they know that people that have a financial advisor are usually a little bit more with it around their finances. They possibly have better records and it’s possibly going to be easier to get approved. You know, of course that’s not for sure, but no, we’re not connected to Quicken in any way. You can use anybody that you want, but if you do want help, Quicken will pre-qualify you for a forward mortgage and they, of course, will also talk with you about a reverse mortgage.

[05:58] Again, not something you’d want to do until you’re quite a bit older, but maybe your parents or grandparents or somebody that you know is in their late 70s or 80s and is debating about this issue of a reverse mortgage or maybe you’ve got somebody in their late 70s and 80s that has a paid off home or close to paid off, doesn’t have to be paid off in its entirety, and they’re really needing more income. Well, they should call the folks at Quicken and find out if a reverse mortgage is a good match for them and again that phone number for the reverse mortgage at Quicken, unpaid advertisement is 888-500-7210. The only reason I keep bringing it up is that I just know how hopeful they are to people. Okay, so we’re going to just kind of

[06:42] talk about the mechanics now a little bit of a reverse mortgage. Most of us are familiar with a traditional mortgage, which means that we have to make a monthly payment, that that monthly payment has a portion of interest and a portion of principal, and the longer we spread out the term, the more interest we pay versus the amount of principal that we pay. Now, what is what makes the reverse mortgage different? Well, the reverse mortgage, as the term implies, is that you are going to get either a lump sum of money, literal cash, or an income stream and that is going to be collateralized by your home and it must be a primary residence and you must be living in it. Now, both spouses don’t have to be living in it, but at least

[07:33] one spouse does and interestingly enough, reverse mortgages can be done on a single spouse or a single person, I should say, or a joint situation where there’s a spouse involved and there’s a lower income if two people are involved and a higher income if a single person is involved and where the emotion comes in is people don’t want to mortgage their home once they’ve worked hard to get it either paid off or close to paid off, but in many instances, especially with somebody that doesn’t have a lot of wealth, if we could just get them out of mortgage payments, they would be in a much better off situation from a cash flow standpoint and so a lot of times if somebody has maybe a two hundred thousand dollar home and they have say fifty thousand

[08:22] dollars left on their mortgage with you know maybe six hundred dollar a month payments or something, they could do a reverse mortgage just to not have to pay the six hundred dollars a month. That would be their goal, whereas maybe somebody else has a say million dollar home and it’s paid off and they want a little extra income, well they could reverse mortgage their home and create extra income and or a lump sum of money that they could go and invest to create extra income and this is tax-free income because it’s literally a loan, it’s a mortgage just like a loan against cash value of life insurance is tax-free income to you because it’s a loan just like a loan on a car at a bank is tax-free to you because it’s a

[09:05] loan, a reverse mortgage on your home at a mortgage company is tax-free to you because of its loan nature and if you have life insurance on your life and can combine that knowledge with the reverse mortgage capability, what that’s going to enable your family to do is when your death occurs they will get the choice so let me work through this. Let’s say that you’ve died and spouse is already gone and the family really wants the house. They can take the death benefit from the life insurance, pay off the bank that holds the reverse mortgage and go on down the road with a free and clear home or let’s say the opposite occurs where the family doesn’t really want the house everybody lives somewhere else it’s not a you know special lake cabin

[09:58] or anything they just don’t want the house. They can give the house to the bank and let the bank that has the reverse mortgage deal with it because that’s what the banks agree to do when they take out a reverse mortgage on a home and then the family can take the tax-free income tax-free life insurance policy payout not premium sorry policy payout and go on about their own business doing whatever they want with that money so that’s the value of having the reverse mortgage combined with a life insurance policy and we refer to this often in our permission to spend article that talks about spending your death benefit while you’re living and that’s actually one way to do it is to go ahead and get a reverse

[10:46] mortgage on your home take that tax-free income and then let that death benefit pay off that reverse mortgage or be given to the family whereby then the reverse mortgage gets solved by the bank and the value of the home the family’s never going to be left in a position where they owe money on that house absolutely and i think you know just common sense if you stop and think about it a lot of people think reverse mortgages are really mysterious or they don’t understand them but all that happens is the amount of money that it would take to pay off your house increases each month by basically the same amount of money that you would have sent in in a monthly mortgage payment so it’s it’s a slow building of interest over time all of these loans

[11:41] are regulated by the government no no you may get the loan through a bank but it’s still the fha is guaranteeing all of these and again not being able to make house payments number one is going to improve the cash flow in the house potentially having additional assets that you could invest and receive an arbitrage on in other words creating income streams into your house with the extra money and number three knowing that you could potentially purchase life insurance we’ve seen people do this into their 70s and 80s that would allow your family members to receive enough cash that upon your death they could make the decision of whether or not to pay that house off sometimes it’s just not practical i

[12:34] mean our our families buy houses that are convenient for them our their kids go to schools that are convenient for them and no matter how beautiful the family home is it needs to move to another family and if they want to sell it they can sell it and they keep the difference between the amount of the reverse mortgage and the amount that’s owed and in some cases if you live long enough and depending upon your real estate market you actually could technically though i doubt this happens very often owe more than the home is worth and in those cases the family is not affected by that debt your estate is not affected by that debt because that’s the agreement that was signed up front whatever house sells for if you owe 110

[13:25] and the house sells for 100 that’s not a debt that you are a state or any of your family members will ever have to pay that’s correct and there’s some additional issues in every state so this is definitely something that you’ll want to check out and laws are changing around this area pretty quickly so i wouldn’t get overly worried about it if it’s something that you’re interested in for 20 years down the road but if you have parents or grandparents that need the help then quicken as we’ve identified can be very beneficial and even if they don’t have life insurance sometimes right now what matters is cash flow and getting them either out of mortgage payments which again a reverse mortgage can do or

[14:10] getting them some extra income to do other things with so again quicken’s phone number is eight eight eight five hundred seven two one zero that’s for the reverse mortgage department for clients of financial advisors quick and reverse mortgage eight eight eight five hundred seven two one zero super well we hope we’ve given some information today that maybe it’s not for everyone but if you know somebody who is you know in that age bracket and they have a home and you don’t really need to know they’re making payments or not i’m sure with all the advertising out there they have to wonder but yet at the same time i’m sure there’s a fear and scare level out there you know i would say find a good professional

[14:51] investigate your options and then make a family decision on whether it’s right for you anything else add kim nope if people have questions and want to contact us they’re welcome to do so partners number four prosperity.com of course ebook is the free book called financial planning has failed but just the regular website at partners for prosperity.com with the number four has contact information if we can be helpful super well thanks so much to kim butler this is no bs money guy todd strobel for the prosperity podcast and we’ll see you all again soon thank you for listening to the prosperity podcast to take control of your money and have it work for you visit us at partners for prosperity.com

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