How Homeowners Turn Home Equity Into Cash Flow

Reverse mortgages still trigger an automatic “nope” for a lot of homeowners, and we get it. The stories from decades ago were messy, confusing, and sometimes genuinely harmful. But the modern version, the FHA insured Home Equity Conversion Mortgage (HECM), has safeguards that make it a very different conversation especially for seniors who want to stay in their home, protect a spouse, and unlock cash flow without selling.<br><br>We sit down with Admiral Flender from Fairway Home Mortgages to explain how a HECM really works: who qualifies at age 62+, what lenders look for in the financial assessment, and why property taxes and homeowners insurance matter so much. We also talk about the “maturity event” timeline, how heirs typically have time to sell or refinance, and the counseling step required through HUD that helps ensure the borrower fully understands the loan and is not being pressured.<br><br>Then we dig into the feature that surprises most people: the reverse mortgage line of credit. We explain how it’s different from a traditional HELOC, how it can grow over time, and why some homeowners use it as a standby emergency fund for retirement, healthcare, or major home repairs. We also cover real tradeoffs like upfront costs and why a HECM may not be the best fit if you expect to move in the near term.<br><br>We close with a strategy many buyers and even realtors miss: HECM for purchase. Yes, some seniors can right size or even upgrade to a home that fits their life better and still avoid a required monthly mortgage payment, as long as it’s their primary residence. Subscribe for more practical downsizing and retirement housing guidance, share this with someone who’s nearing retirement, and leave a review with your biggest question about reverse mortgages.

Admiral Flunder

Fairway Home Mortgage

1-206-890-9961

admiral.flunder@fairwaymc.com

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Transcript

Welcome And Quick Housekeeping

Dennis Day 0:01

Welcome everyone to Getting Your Edge. How to Downsize Your Home Podcast. I'm Dennis Day with the Edge Group Team and EFB Realty, and I've got my co-host, gratin. Hello, the managing broker of our Edge Group team, and today's guest is Admiral Flunder of. Fairway home mortgages and he's gonna talk about a product that I think you'll find incredible that can really change your life. Before we get started, I'd like to ask you to like this podcast, subscribe to the podcast, share it with someone so we can build an audience that gets this information that can be so valuable to people. Alright, let's get going. We're gonna talk about something that has a bad rap. Reverse mortgage. Explain. Judy. What? Well, I just know that for a long time when I've talked to people and mentioned reverse mortgages, they have like, no, no, no. I don't wanna get involved in that thing. I've heard horror stories about it, and we were talking with Admiral about the home equity conversion mortgage, which is the name for fairways. Home equity conversions. And that's really what a reverse mortgage is. It's getting access to the money in your home. And I'm gonna let Admiral explain a little bit about why, what was the problem or what did people conceive to be a problem with that mortgage in the past? What really was happening and what's happening today? Well, Judy v. So we call it today, we call it the Home Equity Conversion mortgage, but it's always gonna probably be known as a reverse mortgage, but it's called the Home Equity Conversion Mortgage because it's a specific type of reverse mortgage insured by the US Federal Government that allows homeowners 62 plus to access a portion of. Equity. Equity, right. Or we could call it their housing. And part of the reason that it got a bad name, so we like to call it product that we have today, is a, to the product that was in the past, there were some safeguards that have been built into the product that make it safe. In fact, it's the safest mortgage available because there, there's just very strict requirements in, in order to protect. Senior class, which is a, which is a protected class. So back in 2015, significant safeguards were built into it. But lemme back up just a little bit. And most of us can remember back in two thousands that there were a lot of so-called bad mortgages. Yes. Yes. And, and the, this was a highly unregulated industry. For example, the realtors did not have, have a license, nor did. Nor did loan officers, and there weren't background checks and there weren't credit checks, and there weren't all these things that, that the bad actors were. If you could breathe a, a mirror, you could get a license. I joked with people, you know, you could put a bandaid that said for sale on the front door of your house and get it sold because. That was another one of those periods of time where we had not many homes available and the it, they were appreciating like mad. Whenever there's a shortage of something, they're always going to go up and that you could get a loan. Just state the stated income. I make a million dollars. Okay? You get along without ever having to substantiate that you actually made million. So it was a very crazy period of time and it crashed badly in, I think around 2005 or six is when it started. And I will never forget walking into a home where a family had lost their home in foreclosure and their teenage. Child had written from floor to ceiling on every wall in their bedroom, what happened to their family? And I was crying when I walked out the door. It was, I mean, there was a, that was crazy. It was, they were stealing copper out of. Homes, people were squatting in vacant homes. It was, it was crazy and dangerous and I'm glad that period is over. I hope we never go through it again. But somehow the reverse mortgages got caught up in that as well. But they actually started, did you say, in 1989? I believe. I remember seeing some famous actors on maybe, um. I can't think of his, Tom Sellick. Tom Sellick standing there in his very calm and deep voice talking about reverse mortgages and I, I remember people being a, that they wouldn't have anything left to leave their children. A lot of people to this day don't understand equity and how your home. You buy a home for a certain amount of money, and normally homes go up in value every year no matter what, just because of inflation, I guess. But when demand comes in, when there is a shortage of homes, it causes equity to grow insanely. I mean 25, 50% depending on where you are and what your, your market is. And we've seen a lot of that here in the northwest over the last, I would say 10 years because we've had such a shortage of inventory. And so that money, when you, when you bought your home for 130,000. 30 years ago. Let's, we're talking here basically because reverse mortgages are for people, for seniors. You can't really qualify for one unless you're how old, 62 or older, 62 or older. But if you've been in your home for 25 or 30 years and you paid 130,000 for it back in the early, uh, late 19 hundreds or whatever now worth a million dollars. So that money, when you go to sell, there's your equity right there. And so a lot of people think, well, I have to sell my home to get to that money and I can't, can't do the things I wanna do in retirement until I get to that. But then there are also people that think, well, that's my wealth. I'm gonna leave to my family. And in this day and age, most people are not really looking at that as much as they used to. At least I'm not. So anyway, I think I'm, am I on the right? Yeah, absolutely. With absolutely. Um, the home equity conversion, so what you're doing with this home e equity conversion mortgage or a reverse mortgage is being able to get access to that money that has been building in your home all these years. Before you sell it and there's some real benefits to the whole thing, right? Absolutely. So the Consumer Financial Protection Bureau regulated all more to this, and so as I'll continue to say, don't like to refer to it as a product, but it is a product and it is a distant cousin, this product that created such bad press. What we have today is a distant cousin to that particular product. And there are some things that we didn't do. We didn't realize that we had to make sure that, uh, that our clients were used to making their, paying their property taxes on time, paying their insurance on time. And now that's part of the regulations. And because it's designed to be a sustainable resource, even if we have a situation for a client has not. For whatever reason paid their property taxes and insurance, we can then take a portion of that equity and put it in, in layman's term we would call it in a escrow fund, so that then those payments are made on time and we actually take the number, we at 20%. 'cause things do go up. But then, then it. That's one of the safeguards built into it to make it a sustainable solution. Because when people weren't paying their property taxes, and particularly, and we all know, there's only two things that you have to, you have to do. One is die and the other one is pay taxes. They will. The, the government will foreclose on your home. So even though you're fine with the lender, you're not fine with the government. And so if those property taxes aren't paid, they will foreclose and you'll lose your home. And then with it goes, the equity that you were accessing. Correct. Yes. And that is, that is, whether it be a, a reverse mortgage or a conventional mortgage, you don't pay your property tags and insurance. Yes. You'll be foreclosed on because the lender requires and with good reason that you have insurance. So if the home burns down or something like that, their investment is covered. Exactly. Yeah, exactly. The actors, by the way, president Reagan, one of the great things that he did was create this program. It was really designed so us seniors would have a higher level of dignity as we, as we, as we matured. And it is really designed to give us a, a better life. I don't, I can't legally call it a program that it's like social security. It's like social security and that you have to reach the age of 62 in order to be qualified to do it. Now, I had also heard that, and, and you. That people who, that they were issuing this mortgage based on the age of the oldest person in the house versus the youngest person in the house. And so people were afraid that they were going to be thrown out, like if the husband or wife were older. The other party who was younger when that person died, that the mortgage had to be called in the house, had to be sold and that person was left homeless basically. And that is not. Not the case. It's actually based on the youngest person's person. Theoretically, they're gonna live longer and so. There's something called a maturity event. Mm-hmm. And the maturity event is if you sell the home, it's that then the, the, the balance must be paid or if you leave the home, or if one of what if both people pass away? But one of the things that gave us a bad name is that we weren't double checking to see if the younger spouse, if they were on the market. Yes. And so, so the fact that you can get. A, a larger access to more equity the older you are, that younger spouse was not put on the mortgage. So here's a question for you because we keep using the word spouse. What if you have two single individual can two single individuals do a reverse mortgage on a home that they own? Because you can buy as two single individuals and joint tenancy. So can you get a reverse mortgage as two single individuals living in the home? Yes. Okay. Yes. Living in the home. And so, so what was happening in the, uh, A A RP actually, actually sued, said, put out a suit because older guys were dying and their wives, their name was nowhere to be seen, so that's where they were having to move out. The home was kind of a forced sale, so, so now there's no way. It's gonna be based on the youngest person's age, and now someone can, a person, a spouse can pass away and then there can be, you can remarry those. But things, but, but that new spouse does, will not have the same access to like the line of credit or any of those things, unless they then would have to refinance and do additional, can you refinance a reverse mortgage and you take one and then do another one, and. And cancel out the first one if you have enough equity. Okay. And with this growth in, uh, the depreciation in homes, there was a lot of refinancing done. And so, so it's like, it's like any other mortgage. But the difference is that you have to have a certain percentage of equity in order to. Be able to originate this type of mortgage. So can you explain what that looks like? You make an application for the loan, is it based, because we're talking about people 62 or older, hopefully. Maybe they're in retirement, maybe they're not. Is there, do you look at what they. What they have beyond the equity in their home, like stocks, retirement funds, work, if they're still working, is all that taken into consideration or is it, or is it, are you looking strictly at the house? The equity in the home? The equity, the home is certainly the major factor, but the terms, the credit terms are considerably. Less stringent than a a, a registered mortgage. In other words, a person could have a low credit score, but if they paid the mortgage on time and if they paid their insurance on time, we have a two year look back. If those have been paid, then it makes it, and then we wanna also make sure that there is enough reserve because the last thing we wanna do is. Refinance a house for individuals who don't have enough reserves to keep the home up. Those, those things are factored in. We, that's what we call our financial assessment. But, uh, for a single individual, after all their bills are paid, if they have $589 left over, they're gonna qualify for the mortgage. Now here's a question that just came to mind. So they may, they've made their house payment. They keep making their house payment over here. However, they have multiple credit cards and medical bills and things that are in arrears to the point where maybe they have to declare bankruptcy if there's too much equity in a home. I think. That home must be sold to, to give money back to these creditors that ever, do you look at that? Do you consider that? I mean, if, when you said a low credit score, what are you referring to? Something under 600. Okay. All right. And as long as, so, as long as regardless of what their, their outstanding balances are. Okay. If there's enough, if there are enough reserves, okay. Where they can continue to make those payments on time. You know, we really don't care. The thing we really focus on is do they pay their property taxes on time? They pay the, in their insurance on time, and if they still have mortgage payments. That they've made those mortgage payments on time and can maintain the home. And a lot of people that we run into in trying to down that are looking to downsize and sell their homes, a lot of times it's because they're getting to a point. Middle class America, let's face it, they don't have the money to maintain those homes. And it's heartbreaking to walk into a house where. The roof should have been replaced 10 years ago and they haven't had the opportunity to paint it. And so there's, you know, there's dry rod or whatever, and yet you see it. I mean, you drive around and you see it where they just have not taken care of the home. This sort of thing, if you were able to get it. Before you got in that position and you stayed in the home, you would not be making mortgage payments where you could maybe afford to pay the house or get the roof or do the things that really need to be done to maintain your investment. Let's talk about what are the, the heck is essentially a distant cousin of the home reverse mortgage from the past. So what are the advantages for the homeowner who has paid off the home or has a small mortgage at a low payment and a lot of equity? What advantages does this loan? So part of the equity in that in the home is set up in, in a fund, it's called, uh, a line of credit. That's actually, in my opinion, that is the number one advantage to doing this. So that line of credit now, it's hard to to wrap your mind around it, but that line of credit actually has a growth feature. Actually. If you just leave it there, it will just continually grow. We've seen instances where individuals, they didn't need the money, they just set it up in the event that they had a event. Situations that occurred in the past that the actual line of credit over this is like over a 20 year period actually exceeded the value of the home. That's not true with most lines of credit. This is the reverse line of credit. This is, yeah. In fact, some people, they look at it and they think it's too good to be true. Because how can, how can that be? And that's, is that tied to the appreciation of the home? It has nothing to do with the appreciative appreciation of the home. Wow. It, and that's one of the things that seems too good to be true regardless of what's happening on the value of that home, that line of credit will continue to grow. Uh, it's, it's tied to a, um, the, the, a treasury note, but right now the, the appreciation rate is six point. 6.85. I did one yesterday. And so that is compounding monthly. So I, I had an example for a client yesterday. They had a, their home was worth 1.1 50. They owed 355,000, but we were still able to set up a line of credit of about 60,000 and it would, and I think we looked over. A five year period that 60,000 had grown to 120,000. Now it'll continue to grow regardless of what's happening with the value. So when you say you set this up, this is not a standard HELOC as they're referred to HO Home Equity line of credit. This is the reverse mortgage. So this money is this 60,000 is sitting there, but they're not making loan payments at all. Not on the mortgage, not on the. Yes, there's no requirement to on that. But what's really interesting, and this is another thing that seems too good to be true, I have clients who, who, who continue to make that mortgage payment and that amount. So let's say if it's 2,500, they make that payment. Five business days later, they can go right in and take that $2,500 question to ask. It's their money. They're just borrowing their own funds. So there's that, that, and so we are looking at that 6.85 compounded monthly. Many of our clients will spend their emergency fund because their line of credit then becomes their emergency fund. So they with, with this home equity conversion mortgage. You don't have to make a monthly mortgage payment, correct? That is correct. But each time when I, we say that we also, we have to say, but property taxes and insurance right? Must be paid. Okay. But they can make a payment like they had been doing before, the home equity loan conversion mortgage. And that can, that builds up the line of credit and its. Uh, it is like an investment, which will us saying was a six plus return. Yes. Okay. What is the, in general, what is the interest? I know it probably vary on each person based on, like you said, their credit, but what is the interest rate on, because it is a mortgage, there is an interest rate, and it is, it is. The balance owing, correct? Yes. Alright, and that interest rate, is it, it varies. And so it, it's a, a variable rate, always a variable rate. It's always a variable rate. Okay. We have a fixed rate, but the fixed rate really. 95% of our clients are gonna use a variable rate because when rates go up there, their um, their line of credit is growing. We have some clients, they, they celebrate when, when, when the, uh, interest rates go up because they know that their return on that line of credit is gonna be much higher. Okay, so the way I think I'm invis envisioning this, you look at the home, determine you have it appraised. You determine the value of the home, you're, and you're willing to basically lend the amount, the full amount of the value of the home, or 80% or. What percentage of the appraised value does a lender is a will lender willing to do a reverse mortgage on? Well, we, we don't, so let's say for example, a client had a home that's worth a million dollars. Mm-hmm. And I'm looking at my phone 'cause I can do a quick calculation. The home is worth a million. Let's use the youngest age, which is 62. That individual would have access to dollars of line of credit. Line of credit and what could they spend that on? Anything. There's, it's their money, it's their equity. How quickly can they access that five business days? Five business days. So if they wanna go on vacation, they can pull from that fund if they want to. Absolutely. And that fund will continue to grow at the interest rate. Current interest rate tied to a treasury note. Yes. And today, that's 6.705%. And re, I mean, this can get so complicated. Everybody's gonna go, ah, and their head will explode. But treasury notes go up when the stock market is going down. Is that correct? And then vice versa, little bit. I, I wish I could answer that. That's not, that's not my area of expertise. One of the things I also need to mention is that when I talked about safeguards built that were built into this program, so one of the challenges that we had in the beginning is that, let's say for example, the same client had access to $396,000. Let's see, 96,000. Some folks would just take it and spin it, and they blame it on the reverse mortgage when. It's all gone, and so we build a safeguard into it. Only 60% of that 296,000 is available the first year, so in this particular example, they're going to have 167,200 the first year, and then one year and one day later. They'll get the balance. That balance has set in that account and it has appreciated, and that is just access to the balance. It's not that the money is sent to them, it's just sitting there waiting if they need it. And then, and while all this is going on, if they've. Taken out this home equity conversion mortgage with you, they're not making a house payment. That is right. Okay. So where does the money come due and how does that look at some point, I mean, this doesn't go on forever, but you did say that, let's say it's a couple and one person passes the older, let's say the older and the younger one is still there. What happens or what if it's tied to the younger one? One passes and the older one is still there. So it's always tied to the youngest one because theoretically they're gonna live longer. Okay. And so, but if they die, if they die, as long as one of the two individuals is in the home, whose name is on the mortgage, whose name is on the mortgage, then the, the line of credit growth will continue and they can stay in the home until they pass away. And once they pass away, their heirs will have up to one year. To either sell the home or refinance it. Okay. And pay off the monies owed. Yes. Which is the money that was borrowed plus the interest rate that's been accruing on the money. Borrowed on the, yes, on the moral money borrowed. And this particular instance. One thing I need to, uh, I will digress and talk for a moment. So you, so we, we talk about this appreciation on that line of credit. So in order, so that is. There's a mortgage insurance premium paid in the beginning to start the mor to start this, okay? And that's based on 2% of the value of the home, okay? And that's what guarantees that line of credit growth. And that's why it doesn't, regardless of what happens to the, the value of the home, that line of credit. Continues to grow. Some folks call that a put that it's, you know, I'm gonna go ahead and set this up. I don't need the money, but I wanna wanna leave it there. So when I do need it, you know, when's the best time to buy insurance? When you don't need it? When you don't need it? So individuals, the sooner you get into this at the age of 62 and the better your growth, and this particular example, the closing costs were roughly about $26,000. Okay? And that part of that is 2% of the value of the home. And that is, um. And that's where the, the investors, they're making their money on this loan balance, so whatever growth there is on that loan ballot ballot, that's then when, when a maturity event occurs, the home is sold, or both pass away, that's then when the investors will get a return on their investment. Is it possible to, as the person who's taken out this home equity conversion loan, to know what? That balance is at any given time, can you, okay. Yes. We can set up a, an electronic account and you can go in and check it at any time. And I don't mean just the, the money sitting in the account that you have access to, but also what's owed on the property. So like if you, if you've been living in this home, you stay in this home and suddenly you can't stay in this home anymore, you need to go into assisted care or whatever, can you then look at it to make. To try and help you decide what your next move might be, if you're going to sell before you pass. Absolutely. Okay. There was a, you get a, you get a, um, what do we call it? A mortgage statement every month. Okay, great. I, I'd like to take a moment and give our audience a chance to look at this perhaps visually might help them understand. So I'm gonna share some slides here. Just a moment. Let's get us over here. Alright. The big idea here is that most homeowners. Have wealth in their home, but it's tracked. It's not liquid. You can't just pull out the money. Why wouldn't I take out a home equity loan? Well, you certainly could. The advantage in the home equity conversion mortgage line of credit is you do not have a required payment on the principle and interest and. This insurance program guarantees that regardless of what happens in the economy, that it cannot be canceled, that that growth is gonna continue regardless of what's going on in the economy. That's huge right now. So homeowners have a significant equity in their home. They don't know how to use it without selling or taking on more debt like an home equity. Line of credit or a home equity mortgage, the equity they have isn't liquid. They can't just pull cash out. So what we're showing you today here is how to access that home equity without going into debt. How to eliminate the mortgage payments, create a cash flow, and how to create more financial flexibility. And so I might, can you go back to that one slide I just wanted to make? So the accessing equity without debt without required. Repayment, but they, anytime they're accessing the equity, they are incurring debt. Okay. Thank you for clarifying. All right. The home equity conversion mortgage, or he convert the equity into cash. Eliminate your mortgage payments. Please pay your taxes, insurance, and keep your home maintain. We've talked about that very times. Okay. Here's how conventional mortgage works. You're looking out there, there's a home out there. You buy it, you get a mortgage. It's usually a a 30 year mortgage, and then you start making monthly payments, and that payment is going into paying, paying off that loan month after month after month. Same thing, 30 years. All right? The home becomes more valuable, and you're paying down the debt on your mortgage until one day magically. This is not everybody. You have paid off your home, you have no home mortgage, and your home has increased in tremendous value over the 30 years or so of the, the mortgage. That's how the kind of, the standard one was. You've got this home, it's very valuable, but it's not liquid that you can pull cash from. Okay, so let's look at a, a reverse or the heck up. You've got your home. It's very valuable. You've paid it off or come close very long. Mortgage, you should congratulate you. If you do, it's a fantastic achievement. You've got this value in this home, but it doesn't bring you any cash flow. You can get cash by doing a home equity loan, but you're again paying debt. Alright, so we don't wanna pay debt. Let's get a home. Reverse. The reverse mortgage. Suddenly. The piggy bank is open and you can bring money that you have put into your home for decades. Take off the mortgage payment, get a line of credit, increase your cash flow, so that can be taken as a lump sum. Some people do, uh, a monthly payment, so you could actually. If I, I'm correct, you could get a monthly payment from this mortgage, is that correct? Absolutely. It increases the balance on your mortgage, right? Your reverse mortgage. But you could do that or you get a line of credit or some kind of combination out there of Right. It's got a lot more flexibility than I was aware of that line of credit. That's just amazing. So who's eligible? You have to be 62 plus and you have to have significant equity in the home. Percentage of equity do you need? Well, it, it, it's always gonna depend on the interest rates. Once upon a time, four years ago. Interest rates were low, that you'd only have to have 50% equity. Now you have to, depending on the age, if you're starting at 62, you have to have about 70% equity in order for this to to work. If you're, if you're 70 or 80, the older you are, the lower percentage of equity that you need to have in the home. Okay. Why is that? I don't understand that they use actuary tables, so theoretically that. Is gonna live for a shorter period of time, and so there's more access, okay, for them versus, and so, and then of course they're not gonna run out this equity. Now we don't, it isn't all of the equity that's in the whole, it's just the percentage of equity that's gonna be made available through this whole equity mortgage. Okay? So if you're, you paid off your home and it's worth a million dollars. You're not getting a check for a million dollars, correct? No. And you know the other thing, the old reverse mortgages, they didn't have that, that line of credit part of it. Did they? They actually did, did they? I was not aware of that. Yes. Okay. This mor, excuse me. How do you access the funds that you have built for decades that are invested in your home aren't liquid? So you contact a mortgage broker that's certified in the heck, like add, like admiral, okay? You have to supply the necessary documents. You gotta prove your insurance, you gotta prove you paid your taxes and that you have been paying your mortgage in the past. You have the house that is appraised and then you have to attend the education class. Yes. And that education class actually will come before the home is appraised. Now, is there a fee for the education class for homeowners? Yes. The average cost is about 175 person or do both people. I would assume yes for both people and, um, you know, the kids can be there and it's, it's our obligation to be sure and make sure that the client understands how it works. Mm-hmm. And so the, these individuals hired by, by the, uh, housing and urban development. They're, we can't, as loan officers, we can't have any contact with them. We can't be on the call with the client. We shouldn't be at their hall. They want to make sure this is part of the protection. Be sure that they know what they're getting into. And this, these, these counselors also have been trained to understand that sometimes one of the kids or grandkids. Has a gun to that parent's head to, to get them to. So, 'cause they want their money now instead of waiting. So they're, they ask questions specifically to kind of determine if there's, uh, uh, what do we call it? Uh, elder abuse going on. So do the counselors then have a say? In this whole thing, if they feel it's not a very good, like if they find that sort of thing going on, they're not going to tell you to go ahead and issue this money. It's that they won't give us a specific, so everything stops right there. Okay, so that certificate has to be signed and then we can then proceed to the next step, and then the appraisal happens. So we have that a little bit backwards, right? So is it safe? Yes. This is insured by the FHA, not the f. FA. All right. Well, and you can't be removed from your home as long as you make your property taxes, insurance payments, and of course, if, if you're an condominium and there's HOA dues, those are, that's another one. Yeah. They, they must, you have to pay them because they can foreclose also. And the mortgage class, is that, do they have to go somewhere for that? Is it a Zoom meeting? Does someone come to them? Is it a telephone call? How do they do it? They can visit. But the easiest thing is a phone call. Is the phone, and do you as the lender help set that up for them? I cannot. I cannot only, okay. Well, well, yes, actually, I, part of the, in initial documents are, are a couple pages that show the nine federal agencies all over the country and then it shows five there are within that district or region for that the person. So if someone is interested, they can reach out to you and you can. Direct them to where they need to go to start the process. This is not something that as realtors we are involved in necessarily, unless, and there isnt, unless you can actually buy a home on a reverse mortgage, can you not? Yes. And that's one of the things that, one of the biggest secrets, there's so many with all due respect that, but most consumers and most realtors. Like yourselves, do not understand that there's a home equity conversion mortgage for purchase or person can actually purchase a home using the home equity conversion mortgage. We call it the HP. So they would have to do a down payment Yes. Of a. You know, so if they sell their home, make the down payment, which is it vary depending on age and, and the whole thing. Yes. I'm getting it. If we, if we use that same million dollar example, Uhhuh, and we use that same 62-year-old, that, uh, 62-year-old would have to come up with 700,000 and then we're gonna cover. And that 300,000. So, so for you as realtors, one of the greatest things is there's many people right now that wanna upgrade. They want a more modern home, but they don't want mortgage. Or maybe they want a beachfront home, or maybe they want a lakefront home, or maybe they want a cabin, but they still want it to be really nice and prices have gone up. So if their home, when they sell, it can provide them with enough equity. To do the down payment required. Then that loan comes into play to finish it off so they can buy more property and they don't have a payment on that loan. Do they still have a line of credit on that loan or no? Only if they're, if they decide they wanna make a payment. Okay. So whatever payments they make. Immediately and then it sits there and it appreciates based on the interest rate of the treasury note, which right now is like six. I'm getting it. Yes. So you're saying that somebody who has a significant amount of equity with this reverse mortgage could not just downsize to a smaller home, which we typically think of. They can actually upgrade to a more expensive home and a dream location across the country, maybe. Kids live in California, it's more expensive there that they could actually do an upgrade. Yes, yes. And then they could theoretically it, they sell their, uh, they, they buy it. Let's say their home was a million dollars, but it was a two story and they wanted a rambler. They could then could right size, get another million dollar home, half 300, sell their home for a million. And then have $300,000 fees of that they've taken out of that illiquid asset and can maybe give their kids a down payment, well, their next home, or travel by, by a beach, buy a a second home. Can you use this on a second home? You can, you can use that line of credit on a second home, but the, it's required that you must leave that the, the home that, that the hacker has done on, that must be primary residence. Okay. That you must technically live in for six months and one day per year. Okay. Um, are there anything, is there anything else you think you, that are. Listeners should know about this. Are there any downside? The downside, so we're talking about the refinancing. If a person is only gonna be in their home for three years, then I, I don't know if it's the best idea simply because of the upfront cost and so forth. So we always ask, is this going to be your. Home. This is a home you want to age in, place in. And so I'm not saying that we won't do it, but we would, our company is, we're gonna advise against it. We're gonna say, you are right. This is a good way to go, but let's wait until you are ready to three years from now when you're going to get into another home because you all, you know, you're gonna increase your equity that you're building up and then you can use the hack for purchase to purchase that next home. And, and, and one thing we didn't talk about, but I hope you don't mind. Talking about it right now is that, you know, the, the Holy Grail used to be a pay it off home. Mm-hmm. And, and, and to some extent it still is, but our research has shown that the reason we wanna pay it off home, in, in, in retirement is so we don't have any mortgage payment. Correct. But I've had clients that I've helped who they, they, they retired early from a job they didn't particularly like. Because they then did not have a required mortgage payment. And they just, the, the, the, I've had clients say that they've gone from an older, from a, what they call us curmudgeon, curmudgeon to, to this tapping to grandpa. Why is he all sudden so happy? He's so happy. Just 'cause he does, he no longer has that to work. That job. He doesn't like, he doesn't have to work for another four or five years. And I've had folks, they didn't retire. Because psychologically they knew that they could say they could retire the next day. So the weight of having to work Yes. Was listed. Oh gosh. This is, this kind of breaks me up. I have a, a friend of mine and he came to me and he says, and I, we just remodeled our kitchen in our, in our family room. We just love it, but excuse my, my, but these are his words and I'm afraid my fat ass is, is gonna stroke out and I wanna be sure that Susie gets to stay in the house. And I said, well, let, so let's go over more de he says, no, you know me, you know, I've read everything. This works for us. And, and it just, just fills me with joy. We went to lunch and then when we drove back to his, I picked him up and we drove his house and I said. And he says What? I says, your home looks different now, doesn't it? And he says, you're right. It's so, it feels so good to know that we could stay here for the rest of our lives. Yes. And that is the thing. That's why. I do what I do, that seniors like myself can have the best retirement and us curmudgeon, better husbands, better grandparents, and better friends. And that's why we like Admiral so much because that falls right into our belief system on working with people to make their lives better. I really appreciate you taking time with us today, Admiral, and I hope. If anybody finds this, I giving them a little hope for their future, regardless of what that looks like, that you will consider reaching out to Admiral and talking to him about this. Or you can always call us and we can connect you with them and, and if you're thinking of buying or selling well and then instigating that reverse mortgage, of course, please feel free to reach out to us, right Dennis? Yeah. Here's Admiral's information works for Fairway Home Mortgages. Give you a call if there's something that's interesting, if you want to see how this works with the home equity conversion, mortgage works with selling your house, purchasing somewhere home in some other location. Downsizing we're the ones to turn to for that, but Admiral is the one to go to for the mortgage advice because he is the certified. Come a mortgage broker, you have to have a specific training on this, bro. This, uh, mortgage with our company? Yes. Yeah. You have to. We, we, because it isn't, it isn't just a mortgage. No, it's more than just a mortgage. And for us, we want, first of all, we wanted to make sure it's a sustainable solution, but we also, we've, we just want folks to know what it is. There's no ever pressure on our side. What we'd like to do is show, here's another option to look at. Period. There's an an option that most folks don't know anything about it. And I have to tell you at my advanced age, that's why I do what I do, because it's just, you know, when somebody says, that sounds too good to be true. And that's actually what I said when my buddy introduced it to me six years ago. I, I didn't even want to hear it, but I know I had known it for some. That's been the case. People are like, oh no, that's a horrible one. I've heard horror stories about it. Well, maybe it used to be, but it isn't anymore. It isn't anymore. Thanks, Al. This has been getting your itch, how to downsize your home. Our podcast has many episodes about all kinds of topics to deal with downsizing, and we hope you subscribe. To give us a build our audience and so we can provide more and more of this informative, commercial free. Thanks so much. Thank you. Thank you everybody.

Dennis Day 43:28

Admiral Flunder, Fairway Home Mortgage, 1-206-890-9961, admiral.flunder@fairwaymc.com