Hello, everyone welcome back to a new video sean's, a name and mortgages are the game today. Only a reverse mortgage is a concept that is incredibly hard to understand. I get it, i mean owning a home that has a mortgage that not only pays you but allows you to never make another mortgage payment in your entire life sounds like the best thing on earth and they're super cool, but so many people give them a bad Rep because nobody really understands them fully, if you don't 100 understand what you're getting yourself into then, yes, they could be very detrimental just like almost anything in this world, but it's definitely a topic that needs actual diagrams and visual representation to fully understand and comprehend. The subject, which is why we are here today and for those who don't know, i'm a licensed mortgage broker in numerous states.

So if you do have a question or you want to get started with, the reverse mortgage then feel free to contact me at lending.sean. Otherwise, let's jump on in okay, so i'm gon na actually start out this video by giving you a fun fact about reverse mortgages that not a lot of people know, but it's the fact that you can actually purchase a home with a reverse mortgage. They are not just for refinance transactions, you can actually buy a house with a reverse mortgage and never make a single payment on that home. I think that's pretty cool, but okay, let's start out by getting a better understanding of this entire topic and then, as we kind of get into it, i'll break down the qualification metrics and a little more of the nitty-gritty.

The easiest way to understand a reverse mortgage is to basically look at a normal mortgage and then flip it upside down on a normal mortgage. Let's say on a home price of five hundred thousand dollars with twenty percent down. You have a mortgage loan balance of four hundred thousand dollars with, let's say a 3.5 interest rate for the next 30 years. You're gon na be making a monthly payment of a thousand seven hundred and ninety six dollars and slowly paying down the loan balance until you own your property, free and clear.

So now, let's flip that scenario: you're 75 years old, you own a 500 000 home. But let's say you've owned it for 30 years or actually better. Yet let's say you've owned it for 25 years and you only owe 50 000 left on the mortgage. Well, a reverse mortgage will still have an interest rate.

So, let's say 2.875 in this scenario and instead of you paying that remaining 50 000 balance down you're actually going the other way, you're getting cash in your pocket up to about 50-ish percent of what your home is worth. So in this case, we'll call it 250. 000 and to get this cash, you can do like monthly cash payments to you. You can do yearly, you can do like a line of credits or you could just do a lump sum right at the beginning.

Now, if you're sitting there like sean, what the heck is the catch and also what's the point of an interest rate, if i'm not making any payments on it, then how does that interest rate get factored in or how does the lender make money on this or Really just how does this whole structure of a mortgage work if i'm getting paid and those? My friends are very good questions. You do not ever pay the interest on a reverse mortgage until you do one of two things: one you sell the home and you got to pay off that mortgage balance or two. You refinance the home into a other mortgage or a different type of mortgage, or, i guess kind of the third reason if you pass away and your heirs do options one or two, so all those years you're in a reverse mortgage, it's accumulating an amount of interest Owed at 2.875 percent on the balance of the reverse mortgage so 15 years later, when you're 90 years old, your reverse mortgage has accumulated a new balance of 384 597 000 and when you pass away or sell slash refinance the property. That amount is due to the lender, who gave you the reverse mortgage pump the brakes.

This is where everyone freaks out. They go whoa sean. I can't do a reverse mortgage because i don't want to leave my heirs. You know my children or whatever.

I don't want to leave them all this debt. No, i can't do that to them. Look. It is 2021.

At least the time you make in this video and reverse mortgages are not what they used to be like back in the early 2000s prior to 2008. Even in the 1990s reverse mortgages are designed to protect your interest in the property. We do not want a repeat of the housing crash in 2008 or even housing crashes in the past, because again those crashes were caused from people defaulting on their mortgages and foreclosing. Those crashes weren't fun, so we don't want those again.

You can only get out a certain amount of cash in your property to ensure you have tons of remaining equity. So you are in a good financial situation for when you refinance or sell the property. These reverse mortgages have changed tremendously and are designed to protect you plus. The lender wants to protect their interest.

Pun intended, i guess, but the lender wants to protect their interest in the property too. If you owe double of what your home is worth, the lender is not going to be getting their money back, and that was a waste of money to give you that reverse mortgage in the first place. So we do not want that crash. That happened back in the day and i'm not saying it can't happen.

I'm just saying: there's much more regulations put into place now by the government to ensure that is much less likely to occur. Anywho come back to that 384. 597. 000 figure.

Okay, if it was due at that point, 15 years later, you're in a phenomenal situation. First of all, if the property didn't appreciate at all during that time frame, which is like basically impossible. But if that did happen, you would still be in a really safe spot. You'd basically just sell the home for five hundred thousand dollars, collect your 115 grand in equity and do what you want, or you can even do a normal mortgage on the home and you still have tons of equity.

To do that. Let me break it down more. Realistically, for you, though, homes in california, arizona and texas, which those are my most popular states, i work in homes have been appreciating at about a 14.8 percent year, appreciation rate and that's right now, because we are in a massive boom and homes are appreciating like crazy. So, let's be mega conservative and take the average over the last 50 years.

Okay, if we take the average over the last 50 years, it's about 6.9 percent - and this is with multiple housing crashes happening. But with a 6.9 percent appreciation rate, your home will be worth 1.3 million dollars by the time you get rid of your reverse mortgage, so that means you'll have 975 706 000 dollars in equity, which puts you into an even safer spot with your reverse mortgage. When you go to sell or refinance it, so you see what i'm kind of saying now i'll, be totally honest with you. Yes, reverse mortgages got a terrible rep back in the day because they allowed homeowners to basically take so much more equity in their home where, if things start to reverse and the home market starts crashing, they've got like a double crash going on, because one their interest Rate on the reverse mortgage is going up, so their balance is going up, yet their home value is going down and it's getting worse and worse and worse.

Nowadays, these are designed to be like here's, your balance and here's your home value, and it's appreciating faster than what your balance is accruing, even if this goes into a slowdown. You're not going to get to that equilibrium part unless the market is absolutely insane and gets cut, half in value and everything goes and we're in like an apocalypse. I don't know, i'm not saying it's impossible, but i'm saying it's very hard to happen with the current regulations that are in place. Look reverse mortgages are phenomenal for individuals who are retired on fixed income and are really struggling to enjoy their retirement, because let me give you an example: real quick, let's say your retirement income with social security or pension or anything that you got going on.

It's a fixed income, so, let's say you're, making two thousand dollars a month. Well, if your mortgage payment is twelve hundred dollars a month, that means you have eight hundred dollars a month to live on, to go. Do things to eat to do your utilities, everything i mean, that's a very hard lifestyle to live and you're supposed to be retired. Things are supposed to be easy.

Personally, i think a reverse mortgage can change someone's life, not only for the fact that you could get paid monthly for it. That's great or maybe the fact that you get a lump sum and you go. Do something fun that's great, but i don't really care too much about that. My biggest thing in the way i live, my life is all based on cash flow.

The fact that you don't have to make a mortgage payment allows you to basically spend two thousand dollars worth of whatever you want to do that month. You just doubled your cash flow for still making the same amount because you've cut out your mortgage payment. I think that's incredibly powerful and is the reason why reverse mortgages are still around, because they truly can change a retired person's financial situation, but wait. I know a lot of people are going to be saying this, because this is why a lot of people hate, reverse mortgages.

They say well, sean. You can be foreclosed on on your home at a moment's notice, for not following the rules or the guidelines in the loan package that you sign in the loan package is hundreds of pages. How am i supposed to read that entire document? And yes, i'm not going to sugarcoat it. Loan document pages are incredibly long, but you don't have to worry about it and it's not complex.

The only way you can get foreclosed on from a bank in a reverse mortgage is, if you do one of three things: if you don't pay your property taxes, if you don't get your property insurance paid and if you don't maintain the property and to me those Are three incredibly reasonable rules to not be foreclosed on if you're not paying your property taxes, then an investor like myself, video on this topic soon by the way, can buy your tax lien on your property and eventually foreclose and own the property. So why would the bank be like hey if you don't pay your taxes, totally fine, we're not going to foreclose, no because they're going to lose their entire interest in that property. If you continue to not pay your taxes, so they're definitely going to kick you out and say you need to pay your taxes or else this home is ours totally understandable there? If you don't have insurance, what happens if the home gets absolutely destroyed by an earthquake when the san andreas fault breaks now, the mortgage company is out tons of money because your home is reduced to nothing and you don't have insurance on it. Thirdly, just take care of your property.

I mean, if you're not having to make a mortgage payment or pay for really anything on your property. When it comes to financing, you should definitely be able to maintain your property, and if you let it go to kind of crap and you let it turn into a pig style, then yes, the bank can foreclose on you your job as a homeowner is the exact Same whether you own a normal mortgage or you, have a reverse mortgage, your duties to protect and to maintain your property and keep it in well-being is gon na be the same. Not only are those the big three reasons how you can get foreclose on on a reverse mortgage, but another thing is it's incredibly hard to be foreclosed on for something that you are unaware of to obtain a reverse mortgage? You have to go through a pretty significant training, kind of module and training material to understand exactly what you're getting into this used to not exist, which is why there's a bad rep for reverse mortgages. But nowadays you have to do a complete learning module to understand exactly what you are getting into before that reverse mortgage can be consummated, so you should be very well informed when you do sign on the dotted line, because i can't just generate some documents and say Here sign this reverse mortgage: no, it's a process and you have to know exactly what's going on trust me.

They are safe, okay, they're, backed by hud aka, the government. So if they weren't safe or if they were detrimental to a homeowner, then they wouldn't be around we're. Gon na see a lot of people like we're gon na give reverse mortgages continually a bad rep, but things have changed. Dave, ramsey and crew are used to these reverse mortgages from 10 20 30 years ago, and i get it you know, but things have changed and the government has been like yeah crap.

We shouldn't really allow people to do those anymore. We need to be a lot more strict on our reverse mortgages and that's the market we're currently in but okay, without droning on forever and ever that's, essentially how a reverse mortgage is and that's kind of the background on a reverse mortgage. So, let's break it down on how you actually get started with one now first step. I definitely recommend you reach out to a licensed mortgage broker.

That's an important thing. Mortgage broker licensed in your area, who's really going to have your best interest in mind and then they'll basically break down the whole process. It's it's a pretty quick process to get started with and they'll be able to give you all the numbers. Okay.

So it pretty much will show you how much you qualify for based on a couple factors like the equity in your home, your age, your property details, and you know, you'll - be able to see like rate and expected balance year by year. And you know you just kind of increase your confidence that hey a reverse mortgage might actually be a really good option for you, and if it's not a mortgage broker would say, hey look. This is not good for you! Okay, you should not do this banks, on the other hand, not sure if they'll tell you that, but real quick, because i know this video is getting kind of long. I want to break down what metrics are looked at when determining.

If you can qualify for a reverse mortgage or not the most important factor is you have to be 62 years old or older and it goes off the younger of you and your spouse. So, whichever one of you and your spouse is younger, that's the age it goes off of, but that's number one number two. You typically need at a very minimum 50 equity in your home and the number three you cannot have a solar lease or a solar loan on the property. So if you have a lease or a loan for solar, it's usually a no-go because that increases risk on the property.

However, if you own your solar panels outright and they're, free and clear should be good to go. Then you need some sort of uh creditworthiness. Okay with an acceptable amount of debt, this one's hard, because every situation is vastly different, but you can't get a reverse mortgage if you're like i've got a 400 credit score - and you know i've got a hundred thousand dollars a month. I need to pay in liabilities.

Yet i make five dollars a month. You got ta like kind of make sense financially, which also brings me to kind of the last point. You need some sort of income - typically, not always, but typically now, a lot of people reach out to me about a potential reverse mortgage, but the biggest deal killer is essentially the equity in your property. So if you own a property free and clear you're, obviously great, but if you have you know 50 60, 70 equity in your property.

That's really where these reverse mortgages shine and they're great options. If you're kind of riding the line, it kind of depends on your financial situation, but typically the people who actually follow through and get reverse mortgages are the ones that have lots of equity in their property or has the ability to get a lot of equity in A property whether that's kind of moving things around like selling some stocks and bonds, or something like that to kind of build more equity in your property. But that's the biggest factor is making sure that you do have enough equity. But that's pretty much it again.

If you're interested in it, you definitely want to get started with a local mortgage broker. Again a broker's gon na have your best interest in mind, so make sure you get started kind of talking with one of them and they'll kind of walk you through the process. A little bit more, i just wanted this video to kind of break down an overall kind of information kind of quick, second of of how reverse mortgages work in today's world, because still so many people hate them and i've seen them change people's lives, so um yeah. I just want to make this video kind of informing people if you found it helpful.

I would really appreciate if you can hit that like button or if you know someone who could benefit from a reverse mortgage and you'd like me to help them out, then i'd really appreciate that as well. Otherwise subscribe for more honest, great content like this. Hopefully you enjoyed it spend a lot of time on these videos, so i really do hope you're getting some value out of this and otherwise drop me a comment. What your thoughts are below and i will see you in the next video you.