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Hi, I'm Ella Gurfinkel, your host of the AskElla Show and senior loan officer at Fairway Independent Mortgage. On my podcast, I cut through the noise to bring you honest conversations about real estate, mortgages, and financial planning.
I interview industry experts to tackle everything from homebuying basics to complex topics like reverse mortgages, trusts, and market trends. With decades of experience, I'm passionate about dispelling myths and providing clear, actionable advice.
Whether you're buying your first home, refinancing, or planning for retirement, I'm here to help you make informed decisions. Join me for straightforward talk about real estate and beyond!
Transcript:
(00:00) welcome to another installment of ask Ella show and my guest today is Craig gagos an old friend as a matter of fact we've known each other for about 10 years that was way before Fairway so funny enough we ended up with the same office small world we have slightly different Specialties and that's what we're going to talk about today because correct specialty is reverse mortgages and as much misconception untruth and Flatout lies and myths that are floating
(01:10) out there about reverse mortgages I felt it was fitting to bring in somebody who actually specializes in them and we're not going to dive deep into all the intricacies and all the dirty details but we are going to talk about the reverses the lies the untruths the myth and going to try to dispel most of of them and basically tell you why a reverse mortgage could be a great solution if you are getting older frankly a lot of us are present company included and again it's just another good option out there that a lot of
(01:44) people discount or flat out right off without actually realizing that it could really be a good option as part of the overall retirement planning and overall Financial well-being again as we all tend to age that process my friends unfortunately is irreversible it's a one-way ticket as I always say something to be said about getting older and being financially sound so Craig welcome thank you for having me Ella it's great to see you you're absolutely welcome it's a pleasure what we'll be able to do today
(02:14) is like Ella said we're going to talk about some of the things that people they have this preconceived notion because of something they heard years and years ago about reverse and it's just really not the case anymore everyone the first thing that happens whenever I bring up reverse to so many people they ask am I going to lose my home right and that is I'm glad you're starting off with that because that is the first thing that usually comes to the Forefront yes when you talk to somebody it's like but I'm not going to
(02:44) own the home anymore couldn't be further from the truth right right and the the home stays in your name it's the deed is in your name that everything remains with you it's just like a normal morgage the simplest way to put it it's a mortgage but it has an optional payment Okay so so instead of someone having that $2,000 a month payment or $3,000 a month payment that um comes along with a a normal 30-year mortgage you can make that if you want if you want to go on vacation one month you can um that's the
(03:15) that's the main thing I want to try to get across today you can still make payments but you don't have to right you don't have to but the wonderful thing about the reverse is if you make that payment and it's a heckum which is the home equity conversion mortgage which is the most popular it's the one that's backed by the uh FHA it's um every dollar that you put in will now go towards a line of credit that you can borrow from later so a lot of people go in and they'll take money out of their
(03:42) home equity versus taking money out of the stock market and we I I can show you a hundred studies that show if you have a reverse odds are you're going to have more money at the end not less people think that it erodes all of your Equity but if you think about this if you think about okay if you have a $500,000 home and a $200,000 uh $200,000 loan what people they forget about is that home grows over time it doesn't stay flat there's only been a couple times in history where the housing market has gone down
(04:16) right and typically it grows at about 4% so if you have a $500,000 home that by the end of that year you're up 4% that's $20,000 that you've gained just and that's every year every year so in four years simple math that's $80,000 so now your $500,000 home is worth $580 but that $200,000 loan yes that can grow but that's simple math again that's $10,000 a year on a 5% APR 5% uh interest rate on a $200,000 loan so that's 10,000 so you have this home that's growing like this and the mortgage is growing down
(04:51) here so let's let's talk for a second about actually what is a reverse mortgage so that our audience can better understand what we're talking about in the first place and then we'll Circle back to why you don't lose a house when you do a reverse morgage and the other benefits and the other misconceptions that we often face all right simplest explanation like I said before it's it's a mortgage that grows over time if you never make a payment the mortgage will grow over time so instead of like your
(05:24) your normal forward mortgage where you're paying that every single month and that interest is getting paid the mortgage is getting paid and the uh at the end of the day that number is lower you that adds your loan gets added to every single month with that interest that ISE so basically it's a loan where you don't have to make your monthly payment like on a forward mortgage so therefore yes your mortgage could potentially increase but you do have the option of making a payment and the reverses come in actually many different
(05:56) shapes and sizes one of them being a home equity conversion mortgage then we have the credit lines again I'm not a pro Craig is so just prompting my guest here yes there are other products that are available we actually have uh reverse mortgages that go up to $4 million yep so you could just have this beautiful home like if somebody moves from let's just say they move from uh Wisconsin or Minnesota and they have this beautiful home that they sold and now they have they cleared 700,000 now you come down here and you're used to
(06:29) that LIF style but you want to come to Phoenix or you want to retire somewhere now maybe you're not going to get that home you love for 700,000 but depending on your age you could buy a $1.2 million home with that 700,000 and still uh complete the objective of not having a mortgage payment each month right so again the misconception number one is you don't own the house at the end of a reverse mortgage right couldn't be further from the truth what happens when well first of all let's talk about what
(07:05) happens with a reverse mortgage what requirements are as far as occupancy goes because that's I think is one of the first most misunderstood pieces about a reverse yes it has to be your primary residence you have to live in it for six months and one day a year that's the rule and um you don't have to live in it all the time a lot of people have a second home elsewhere that they go to during the summertime here to get out of the heat so yeah all right and what happens let's say the older occupants of
(07:34) a home with a reverse mortgage let's say they pass away again nobody's forever it's unfortunate reality of this life oneway ticket once again not trying to get morbid The Heirs do have the right to sell the home or pay off the mortgage yes yeah they can keep the home if they want to there will be they will have to satisfy that mortgage they will have to pay that off whether it be a loan on their own or if you know the deceased has uh life insurance things like that they can just pay that off and they keep
(08:03) the home or they can sell it if you sell it odds are it's going to be worth but let's just say that example that we had earlier was a $500,000 home now they've been in it for 10 years and now it's worth 900 900,000 the loan say that doubles as well or triples uh that's going to be say 600,000 so you have you sell your $900,000 home you satisfy that mortgage you pay that off for 600 Now The Heirs have that $300,000 of equid that's that's over now one of the horror stories speaking about not owing the
(08:33) homes or again the horror stories that are really a spill over from how the reverse mortgages used to be before all of the regulations uh that basically stem forward from the 0708 collapse and then the subsequent uh government regs put in place back in 2010 on multiple forums there are again absolute just heartbreaking stuff about how the family got a reverse and now the home is uh worse left less than what the balance of the loan is therefore the family can't do anything about it that no longer is really true
(09:07) with the reverse mortgages are no longer as entirely true well uh from day one it's always been a non-recourse loan so if the home is worth less than the amount owed The Heirs aren't responsible for that it's a non-recourse loan um if just say for example again you have a $900,000 home but the mortgage is now is a million the airs have the right to buy that they have the first right of refusal to purchase that home at 5% below market value and still not have to pay that amount that was owed over the
(09:40) value of the home and that's a bigot to understand actually that it's not the balance of the loan that needs to be paid off it's market value minus 5% if the balance of that reverse mortgage exceeds the market value of the home if they want to purchase it if they want to buy that purchase it if they don't want to purchase it if they want to just let it go then they will it'll be like the typical short sale that you sold that you saw back during the Meltdown that's all and it doesn't you know it's not
(10:10) going to affect the heirs it's not going to affect the family uh if it's into trust it doesn't affect that good to know yeah so some of the other misconceptions about the reverse mortgage let's talk about the age uh well you have to be for a hackam for the home equity conversion you have to be 62 or older why don't we Circle back a a minute to where people I I want to address one thing where people look at and they think oh my God I'm going to lose the home and what happened to those
(10:35) people those headlines from years and years ago there's only one instance where it can actually still happen and I'll tell you and if you have someone who's 75 years old they purchased a home or they have a reverse and now they marry someone after the fact interesting that um they will have to if they are not on the loan they will have to satisfy that loan when that person leaves the home home whether if they leave and go to a an assisted living something like that they will have to satisfy that so I always recommend if
(11:06) you have a reverse and you get married we need to revisit that and do a new reverse so they will be carefully uh taken care of when uh that time comes so one of the things that I'm asked a lot about reverses and again I personally don't do them that's where I bring in the pros and refer the reverse uh clients out to the Specialists it does take a certain special skill there and it's not that I'm lacking in the skill but it's just not my cupet necessarily again back in the day used to be that if
(11:39) uh one of the spouses was 62 plus and therefore qualified for a reverse and the other spouse was younger it used to be that only the older spouse could go on the loan now I understand that situation has changed yes they can go in alone uh the only the main stipulation is that you just need more Equity because the younger the person is the more Equity you need in your home to get the reverse mortgage and that was one of the problems when back in the day there there was no qualification there was your age and your home value and you
(12:10) could get all this money out but they didn't what they didn't do is they didn't calculate okay is this person going to have the money to pay their taxes because whether you have um whether your house is fully paid off or whether your house has a normal mortgage or reverse what's one way Ella that you can lose your home what's the main way someone can come and take your home well there are really two ways that I can think of one is the property taxes because those always come before the mortgage does and the second one
(12:35) potentially could be actually lack of insurance God forbid anything happens to the home damage wise Y and the home is not insured basically it kind of goes up and Flame yeah if you don't pay your property taxes regardless of this of like you said if you have a fully paid for home if you don't pay your taxes they're going to come and they're going to come and take it from you so that is the one way if you I can lose my home yes don't pay your proper taxes so under the new rules as you heard Craig say and
(13:03) we'll expand on that here in a second it's not just having the equity in the home or having a paid-off home but now everything is looked at closely in terms of do you actually have the income coming in every month or do you have sufficient income coming in to while not having a mortgage payment to still be able to cover the property taxes the homeowners insurance and potentially the upkeep of the home right right and uh I know you do a lot of these it's almost like the VA loan where you have to have
(13:32) your residual income you have to have a certain amount of money left over at the end of the month for us to be able to get that uh reverse mortgage and like I said years ago they didn't have that requirement and now they do because the banks the you know FHA they don't want your home they just want the interest from that loan when you end up selling it that's all and that actually is a whole other huge misconception that the bank just wants my home and therefore they will just slap a reverse in it and
(14:00) then when I'm gone we'll take the house away from me and the family couldn't be further from a truth because correct FHA insured so the government doesn't want your home it's basically government insur it's our taxes that Ure it at the end of the day so the government doesn't need your no they don't want your home the bank doesn't want your home each year the um the reverse borrower pays mortgage insurance okay so even if the bank's always going to be covered they don't want your home they just want that
(14:28) interest when you s and that's actually true for any typee of mortgage the banks literally just want your freaking interest yes they don't want your home they don't want to take your home the for foreclosure process is costly as all get up I mean we're talking here tens of thousands of dollars to foreclose a property in the majority of the states so instead of going through that process they just want the freaking interest right yeah what other misconceptions uh do people typically throw at you because
(14:55) I know I've got a few but I want to hear what you're seeing what you're hearing out there on the street yeah the main one is always will I lose my home uh how is my wife or my husband how are they going to be taken care of do they have to worry about it and like we addressed before if they're married as long as they're married uh when they do the loan or if they're both on they don't even have to be married a mother and a daughter can get a reverse mortgage they don't have to be married I know that
(15:19) they just have to be on the mortgage so I've had that come up several times my daughter lives with me she's actually paying rent I want to take care of her when she's when I'm gone on reverse mortgage you'll never have to make a mortgage payment for the rest of her life that's an awesome solution yeah now something too that I know I throw people for a loop when I bring it up in conversation um happens actually more often with real estate professionals than the regular consumer but even with
(15:48) the consumers it's also always a shocking um or shock reaction rather that you can actually use a reverse mortgage for or purchase yes and I know a lot of realtors that don't even know that and it's been around for going on 16 years now so before you had to um if you wanted to purchase a home you would have to purchase it and then do a refinance for the reverse now you can just take the proceeds from one home and purchase a new home with the reverse so that saves a lot of people like I said earlier if you have this home years ago
(16:19) people were able to move down here and retire here for $2 or $300,000 for a purchase price God we missed those days now you can't I mean after after covid and the price prices and everything's up literally 50% in The Last 5 Years you can't do that so you're not going to come down here and find your dream home where you want to spend your golden years for 400,000 anymore but said but true but for 400,000 depending on your age you can buy a $700,000 home retire in that like I said and still never have
(16:48) a mortgage payment and basically live in style yeah who's an ideal candidate for the reverse mortgage because again I've heard the whole gamut and one of the biggest obstacle I hear other reverse mortgage loan officers uh bring up is that the family often times intervenes in the older borrowers decision to get a reverse mortgage again mostly because of the misconceptions that we've addressed there are more but we're focusing on the main ones but who's an ideal candidate let's talk about that because there are
(17:19) a lot of people who may benefit from it and just frankly don't know yeah for me it's anyone over 62 anyone over 62 when I turn 62 to I will have a reverse mortgage and here's why that line of credit grows over time that if you have a line of credit it's going to grow at five six or 7% guaranteed so you can use that money down the road if you need to um use extra cash to say you want a agent place now you have to maybe have to put a ramp in you have to put railings and you don't have to worry
(17:51) about coming up with that money out of pocket because at the end of the day cash flow is King in retirement cash flow because you can't take take the equity in your home and go to the grocery store and buy groceries you can't put gas in your car you can use cash to do that and instead of you having that mortgage payment you can use that instead every time I hear is it's the loan of last re Resort it's for people who just don't have any money left but it's for anyone who doesn't want to have that payment every single
(18:25) month what if they want to go and V you think of if you're spending even if it's $1,500 a month on your mortgage payment what could you do what kind of vacation could you take just after three or four months of not having to make that payment five six 7,000 that's a heck of a nice vacation if you want to take your family if you want to take your grandkids somewhere if you want to take him to Disneyland or Disney World it's a lot easier to do it that way if you don't have that mortgage payment now something that also used to
(18:54) happen back in the day is a lot of unscrupulous uh people in the mortgage BS used to advise older clients to do a reverse mortgage take the money out and put them into some let's say questionable Investments um from what I understand there are now protection mechanisms against that and the older clients also actually have to go through a fullon counseling session that yeah they are offered by a third party so tell us more about that pleas okay they are protected um it's basically a phone call and it can take
(19:30) anywhere between 30 minutes or an hour for all the all the Bowers have to be on I can't be involved I can't even sit there I've been at a client's house where uh they were going to have their counseling and I had to leave the counselor is like okay he has to leave so the protection is in place and it's really education I'll tell you a funny story I had a borrower who I have these books that I have that I hand out to the clients that are wanting to learn more about reverse so I met with this
(19:58) wonderful um woman her name is Brenda and she needed a reverse and I gave her this book and as Ella said you have to go through counseling so I said okay so in your pamphlet here you're going to call this number uh you're going to arrange your counseling and I said it can take up to an hour she's like okay so I called her a week later and I said Brenda have you made your counseling appointment she's yet and she's like no I haven't I'm like well why not she said well you said there there's a test
(20:24) afterward and I I've been studying the book that you gave me and I said oh my gosh it's not a test with they do is they just ask questions they want to make sure that I haven't told you misinformation I haven't lied to you they want to make sure that you know all a lot of the caveats about a reverse and they want to make sure that's true so she's like all right I'll make I'll make the reservation I I'll I'll make the time so she called me back right after she finished she said Craig I was off
(20:49) the phone in 10 minutes I knew just as much as that person did so it was really funny so she was so nervous about this test but she finished it in just a couple minutes that that whole phone call the counseling and it's a wonderful thing it's it's the only uh class that's protected by that we can't I can't even move forward R verse I can't order an appraisal I can't do paperwork without them doing that uh counseling first so it's a wonderful uh protection for them so really for those who don't understand
(21:20) we are a part of probably one of the most regulated Industries out there compared to any other Financial service I mean yes the barriers to entry may be a little lower than into let's say Securities but in general we are very much under the microscope by the feds and the state authorities as part of the mortgage industry our license numbers get attached to every single loan application and piece of paper that has to do with your mortgage for years to come God forbid we did something wrong and with that level of scrutiny and with
(21:57) that level of Regulation do you think that we would be talking about a product that was actually not a good solution or not a good option for the Aging population I mean how big is the growing baby boomer population right now in the millions oh yes there's 10,000 people that turn 62 or older every single day there's trillions of dollars now that are just sitting there yes it's growing but are they utilizing it are they using that money to have a better retirement and used to be to the older population
(22:31) the the much older population not the newly 62 year olds but the older ones and especially that stems from the Depression era where you know you had to pay off your home your paid off home was your nest egg well like Craig said you can't take the equity in the home to a grocery store you can't take it to a doctor appointment or you can't really take it to pay for a care caregiver to stay in the home and frankly it's a lot of times way cheaper to stay in the home and bring in the help to care for you as
(22:58) you get older to go into a care facility I mean those start at what five grand a month and up from there not more yeah depending on the specialty care so this is something that I've been wanting to talk about for a long time is how misunderstood and how underutilized of a financial tool especially for the older parents especially for the grandparents this may be and while yes there is a wish there to leave the paid off house to the family to inherit in the meantime so many of the older folks are frankly
(23:34) struggling financially right now especially because of the inflation especially because of how the cost of living has frankly shot up like a rocket oh yeah and they're on the financial Struggle Bus every day while sitting on a pot of gold of equity afraid to tap into it or just not knowing that they're sitting on the pot of gold that they could put to use today yeah and they aren't moving forward because of the misconceptions that we've talked about that's their main uh stumbling block of
(24:05) of moving forward and using that money just just to enrich their lives to you imagine if instead of paying that thousand or $2,000 or $3,000 a month on a mortgage you can use that for the long-term care you can bring people in so you can age in place versus having to go to another home and I think we all can agree that my parents your parents my grandparents they want to stay in their home as long as possible and this will allow them to do that absolutely I mean I've been chewing my parents year off about doing a reverse mortgage and
(24:36) unfortunately they're coming back at me with the same we wanted me well they want me and my brother to inherit the house it's like I'd rather you get taken care of and that's probably the biggest obstacle I think that we really have to get through with more of the general population yes just because again the reverses are so misunderstood under understood yeah there under years there's not a lot done each year it's it's amazing to me how I I would think that there would be more reverses done
(25:06) year after year but there isn't and that's simply because of that stigma that that uh is out there right now that shouldn't be in place anymore I mean the information is out there the studies are out there that show you you're better off with a reverse mortgage than not right there is one more obstacle that people actually bring up um and that's well I don't want to do a reverse because it just frankly takes too freaking long especially even when we do bring up a reverse for purchase that's a
(25:38) response that comes up most of the time well we can't really you know take this long to close well how is this long well I don't know few weeks well couldn't be further from the truth yeah the the great things on on a re refinance were done typically in 30 days or less and on a purchase we can close them as fast as 17 days so uh if we're ready to move forward with a with a buyer they they're good to go and um I mean that's almost as fast as a cash burches so exactly so bam yeah exactly if you do have any
(26:11) questions whatsoever about the reverse mortgage Craig's contact is going to be pinned down below and all it takes is a phone call and we are not allowed to charge for a consult so it's always free I mean again one of the federal regs we just can't take your money up front so you can ask the questions and Craig is one of the most honest and honorable people I know and known forever 10 years is forever nowadays and you can just ask and see if a reverse is a right solution for you for your loved ones for that matter
(26:48) because again if you have aging parents and you are not in a position to help them financially and they're not as well off financially as you would like them to be or even they would like themselves to be then it's definitely time to look at the possibility of doing a reverse mortgage and benefiting them and frankly you because now that takes that financial burden of taking care of your parents in additional to your financial burdens off of your shoulders so any questions so true so true Craig is your
(27:20) man and at Fairway we've built one of the best reverse structures and support teams that yes we uh just in the last year CNBC CNN they all voted us the best uh reverse mortgage company out there the speed for the uh of course for the purchase as well as the refinances so it's it's wonderful working here uh I I've been here for uh eight years now and uh it's lovely it's a lovely company and and we are here for you we are we are here to serve you and that's what we do now leave us a comment ask your
(27:56) questions see you on the next one by why