Did you know…? Some Facts You Should Know

Did you know…? Some Facts You Should Know

Posted on June 30th, 2020

Did you know…?

Here are a number of facts you may not be aware of. Some of these have a full page discussion and I’ll refer you to that page. Some will also have a short video about it. The videos that are imbedded are excerpts from The Lee and Desi Real Estate radio show I appeared on and have added some visuals to make it a little more interesting.

Did you know a reverse mortgage can come with a line of credit that grows over time?

At the current expected rates, the Line of Credit will double in less than 15 years and nearly triple in a little more than 20 years. Here is an example of how that might work.

Did you know it may not be best to exhaust your savings before considering a reverse mortgage?

Higher interest rates may mean less money later. You may also lose the benefit of a growing line of credit that grows at the same rate you are charged – likely higher than bank interest rates providing access to more money later in life. See a longer article at Should You Draw Down Savings Before Doing a Reverse Mortgage with video.

Did you know a reverse mortgage helps hedge against possible home values dropping?

The reverse mortgage may come with a Line of Credit that grows over time regardless of what the value of the home is doing. Many of my clients had access to their Line of Credit even after the market dropped and they had no equity.

Did you know you can make payments on a reverse mortgage?

This allows you the ability to retain as much equity as you wish, while also allowing you to skip payments without penalty, when you wish. (Perhaps during the holidays.)

Did you know a HELOC reset could cost you more money?

A HELOC is a bank Home Equity Line of Credit. They usually have a maturity date of about 10 years. Many of those done before the crash are starting to come due. If you qualify, you can usually renew it. If you cannot qualify (stricter standards now), the lender will usually change it to a fixed rate fully amortizing loan. This will likely be at a higher rate than you are paying now. Payments could be quite a bit higher with principal added. A reverse mortgage may be one choice to make that payment go away. (The video below has some problems with the microphone which goes away by minute one.)

Did you know getting a reverse mortgage now rather than later could be an important decision?

The reverse mortgage may come with a Line of Credit that grows over time regardless of what the value of the home is doing. Many of my clients had access to their Line of Credit even after the market dropped and they had no equity.

Did you know you can refinance a reverse mortgage with a new reverse mortgage?

Just like a regular mortgage you would only do so if it provided additional benefits. This could be a larger line of credit and/or larger dollar payments to you. Because FHA home value limits have significantly increased compared to, say 10 years ago, there could be enough money to pay off the existing balance and provide more money – even if your home value is nearly the same as it was 10 years ago. Costs could be minimal. With increasing longevity and a growing line of credit, that could be a significant benefit.

Should You Do a Reverse Mortgage Now or Later?

Posted on June 30th, 2020

I’ve taken a excerpt from The Lee and Desi Real Estate radio show I appeared on and have added some visuals to make it a little more interesting.


Frequently, I hear clients think long and hard about doing a reverse mortgage now or waiting until later. With all things being equal, there is more money as you age. But all things are not equal.

Here are some of the issues:

  1. Reverse mortgages are constantly changing. Who knows what the future will hold. For instance, there used to be a bunch of ‘jumbo’ reverse mortgages. Then due to the huge mortgage losses, investors went away. So without someone to buy the jumbo from them, lenders stopped doing jumbos. So those with high home values and large mortgages (larger than the HECM amount available to them) could not do a reverse mortgage. If the timing became right for them after the jumbos went away, they could not do a reverse mortgage at all.
  2. Depending on how you structure your reverse mortgage, it may come with a Line of Credit (LOC). Unlike other Lines of Credit you may know about, this one grows at the same rate the lender is charging you for what you use. Ten years after you get the Reverse Mortgage with a LOC, it may be nearly double what you started with and 20 years later may have more than tripled. This is an excellent way to protect from your portfolio running out before you do.
  3. Recently, some financial planning experts with Doctorates in Economics have been looking at Reverse Mortgages integrated with a retiree’s portfolio and through many simulations found this risk management strategy improves portfolio survival rates (i.e., how long will an investors retirement nest egg last) by a significant amount.
  4. When total HECMs (the FHA version) reach the max allowed by Congress, HUD has to go back to Congress to request a new cap. This has happened a number of times in the past few years. It has always been approved but there is discussion each time.
  5. All things being equal, if interest rates go up, there is less money available in a reverse mortgage. For a 70 year old with a $400,000 home, just 0.5% (one half of one percent) higher interest would reduce the amount available by $22,000 and by $39,000 at 1.0% higher interest.
  6. Three times in the past 5 years, Congress and/or HUD have reduced how much you received, all things being equal. In 2009 by 10%, in 2010 by 10% and in 2013 by 15%. It may happen again.
  7. Home values could go down. For 6 years of my reverse mortgage career, that never entered my thought process. Most of my clients probably didn’t consider that. We’ve now seen that to be a reality.
  8. If someone spends down certain types of savings, they lose income from that item, may pay taxes on it, may lose possible growth on it and may lose a stepped up cost basis.
  9. One may lose the life style benefits of doing something sooner rather than later.
  10. The obvious – some people need the money now. Foreclosures. Poor economic climate. Loss of a spouse and one or more income checks.
  11. I’m the analytical type and like working with numbers. One thing I learned early in this business was that reverse mortgages were not just dollars and cents. There are emotional concerns. The peace of mind issues are the most frequently mentioned benefit a year or two after my clients have done a reverse mortgage.