Keeping Your Low Rate and Getting a Reverse Mortgage, with Rosemarie Litoff of C2 Financial

0:02 Welcome to the Reverse Mortgage Podcast. I'm your host, Bill Gross. We get together every week with leaders in the industry to talk about not just reverse mortgages, but how to use them to be effective, whether you're a consumer or a professional, real estate professional, financial professional, accountant, or attorney. It's a very there's some very powerful tools, and there's a variety of tools that I as a real estate broker didn't know about. One of those tools is a second mortgage where you can go buy a low rate, let's say first, and offers some of the advantages of first mortgage. Which I'm excited to have today Rosemarie Litoff who's a certified reverse mortgage professional to talk about in particular today seconds. Rosemarie, thank you for joining us today. You're welcome and thank you for the opportunity to present. So give us kind of a broad outline. What's the product we're talking about? Again, it's not the product but the how people use it to help them. But let's first talk about what the product is. Is it a line of credit? Is a fixed rate loan? It's a second position. Talk a little bit about what a fixed rate second mortgage with reverse mortgage looks like. Certainly think of it like a HELOC and what most people know about HELOCs. You want to fix up your kitchen because you're going to move and you don't have cash. So you take out a HELOC and HELOC meaning the home equity lines of credit. You're going to pay at a variable rate. That loan is going to have a 10-year draw period and then the whole thing is due. The idea that the borrower is can borrow up to $6 million now total between their first and their second and real estate agents love this product. It's for folks just like a reverse 55 to 105. You can make payments or choose not to. Meanwhile, you've improved your home because you're moving out of state in two years. You've put in the windows and upgraded the kitchen, etc. Hasn't cost you an out of pocket and the loan is not paid off just like your traditional loan will be paid off when the home sells.

2:00 And so, one scenario that you talked about using this would be to fix up the property, but also be to enjoy it for the couple years. Meaning, you might want to fix it up and enjoy the living room or enjoy the entertainment value or the safety of living the house. I know that, for example, I'm older. My wife is a little bit older now, and so we've had to make some improvements to make it safe. I know my neighbors had to put in some ramps and other things that maybe cost more that they otherwise might not have been able to pay for. So, are we talking about We're not talking about really doing a rehab to sell the property. You're talking about maybe fixing up and enjoying it for a couple years and then when it comes time to sell to recoup some of that investment back in terms of a higher sales price. That's correct. Yeah. And so how well describe a little bit about the loan to value options. How much you know there was a day you can get a line of credit to 100% 95%. Those days are long gone. What kind of loan to value can somebody expect? I know it's somewhat based on their age, right? What absolutely based on your age and your first lien. So combined loan to value. Can you give us a range of what they might look like? It I'm going to say it depends. Age, value, and lien. And I don't like to quote anything because until I put in and then the magic of the numbers happens and I say, "Oh, you're entitled to an additional." But by the way, Mr.

3:19 Mr. Client, I if I came over your house, especially these last couple years, and I went knock on your walls, money would pour out. And that's the increase in equity. I'm tucked by a range of%. I show up at people's houses and I've got my little phone here and I talk to folks and I say, "If you recognize this, you could be my client. It's and this was a true phone in my home when I in a home that I owned." But the shift in people's minds has to come from the myths that are out there on any reverse mortgage. And I can shoot those most of those 99% of those down. But especially in today's market, we've seen what's gone on with the stock market and we've seen people's portfolios that at the time were worked out they could take a 4% draw all of a sudden. Oh my goodness gracious, what's going on? Is my money going to last? Maybe you'd set up a line of credit, either the reverse second or a separate line of credit attached to your to pay off your current loan and take money out of those funds. And those funds are stable once the appraisal is done, the reverse is done, you have access to funds. So when the market's down, you still need to take out your 4%. You can take it from this line of credit. And I show them a chart. If you in the down markets, if you take out from the line of credit versus the portfolio is only going to grow. So when you say line of credit though, that you can't do line of credit on a second. The seconds are only fixed where they pull all the money out at one time. Correct. Right. It's a fixed rate and lump sum payment. But on the first you can do a fixed sum, a fixed a fixed rate, a variable rate, line of credit, monthly payments, et flexibility on the second product. So again, combined loan to value I at least when I've looked at reverse mortgages

5:22 Maybe 30%, maybe more if you're older, total loan to value and so I imagine the same's true somewhat on these second products the combined loan value meaning your first so let's say you have a million dollar first and you owe maybe $200,000 on a low rate first mortgage at 3% or something you might be able to borrow a hundred or maybe if you're older $200,000 but it depends checking into the range of what we're talking about right And again, age is key, right? Because the longer the older they are, the more like the older they are, the more they get. I've got clients that took out a reverse when they were 60 and they're now 90 and they're ups they're what we would call in a traditional world upside down. And foreclosures and all kinds of things can happen. Never in reverse. You pay your property taxes, your homeowners insurance, and your HOA to keep that current. And by the way, the kids don't have to kick in if there's any difference in the bank will get what the house sells for and the mortgage insurance fund will kick in and pay if there's any upside down challenge. So that's an important idea that you're borrowing this and typically people who are borrowing this aren't borrowing it long term. Typically, you use a scenario me maybe fixing house up to sell it maybe a few years down the road, meaning not that they're bringing it up to list, but they're maybe making some improvements that they'll enjoy before they move out for a couple years. And so the rate on this, if I remember right, is like the 9 10% for fixed rate mortgage is maybe, you know, certainly higher than a first mortgage.

6:55 Not much higher really than a second mortgage would be otherwise. No, the rate right now on these loans is about 9% on the second reverse mortgage. You spoke of living in your house for a couple years. I have clients that are in two-story homes and dog gone it, they love their neighborhood and they love everything about the house, right? But dog gone it, we got these stairs. So, I have clients that'll either do a full reverse or put a reverse second behind their current first and put in a stair lift and then they're happy, right? I want perspective there because we have our master bedroom's upstairs, my wife, I think about that one all the time. Now do you see people using these to finance additional dwelling units, ADUs? It would seem to me that borrowing money in the residence. Yes, I see that. The only thing you can't do with any reverse product is purchase an annuity and you sign a document at the end. You're not permitted to permit to do an annuity. People use these to send their children off to college, right? To travel. I mean, there's so much you can do. You've earned these golden years in retirement and then oops, you go to the you're living on your fixed income. You go to the store. I just came back from a major trip and eggs were $10 a dozen, you know, and I think, "Oh my gosh, what are people on a fixed income going to do?" And then they will look at their home to be able to fund things like that. I had clients who had a nice house on a lot that was perfect for an ADU. They built the ADU in the back and the parents moved in the back because they needed less room and the kids the children had grandkids that they wanted to be around and it was a perfect house to live like that. The grandparents said, "Look, as long as you provide do all the kitchen work and do the laundry, we'll move in the back in the ADU." They kind of live like a hotel style with their family. I'm sure they made a good deal to move them in, but it added so much value to the property. The ADU I think cost them $150,000 $200,000 but they it added more than that in value when they were thinking of reselling it. In this case the kids just bought the house for them. So there's some flexibility. I think that's the key thing it seems like with reverse

8:58 Mortgages is it's not that there's a particular program and a particular use. It's there's all kinds of different possibilities and the key is to find the right one for your customer. Absolutely. You hit the nail on the head. Yeah. So, I know that you and I talk and have talked before that you work with real estate agents. It seems to me I'm a real estate agent. I never really hear about this product. I do know there was one reverse mortgage cut team and every year they go to our board, they put out presentation. I've never gone to it because I don't really understand the importance of it. But talk about how it just seems to me like real estate agents are missing this opportunity to discuss this program with their customers. They are missing the opportunity. And I talk to real estate agents all day long. Some folks don't know about a you can purchase a home with a reverse mortgage. Yes. Say you're in a six-bedroom home and you've raised your four children and it's got a swimming pool and you know children have moved on, etc. Now, oh my goodness, wouldn't it be great if we only had three bedroom a three-bedroom condo? Well, you sell your home and most people say, "Oh, I'm just going to take all that cash and dump it into a new purchase." Well, oops. What happens if you need money for health care? What happens if you need money for ABC D down the road? Sell your home and you can get a per you can put on a purchase about 50% down. So, say you're going to buy this $800,000 condo. You put $400,000 down.

10:24 You still don't have a mortgage payment. And that's always the key. Real estate agents like, "Oh, we'll sell your house for this much and you'll pay cash for the next. You won't have a mortgage payment." Yeah. But you're tying up that cash inside. And how do you get it out if you need it? Lots of luck qualifying when you're 80 and you need money for health care. And so I think for people listening to this, if you're if you're a homeowner, there's tremendous flexibility with a first reverse mortgage, a second reverse mortgage, of course traditional mortgages and such. And that's why you want to get a professional and evaluate not the right option for the industry, what's the right option for you. I think Realtors®, this is a product. The second in particular is one where if you just called every customer you had who owned a house and just saw are they old enough to get reversed? If so, what's the loan to value? And might they be interested in pulling out some cash for relatively short-term period perhaps? Just the conversation is going to lead some customers say, "Oh, no. We don't want to get a second mortgage. We're moving to Texas next month. We're moving to Texas next year. Our kids just graduated. We can't wait to get out of California or whatever. Or we're going to buy a new house or we're moving to a senior center. Whatever the discussion is, this is a product I think that with the right conversations, if you talk to a hundred past clients, there's three or four or five conversations they're waiting that lead to listings and that's how we generate business. So, I'd urge you to reach out. Rosemarie, do you do education with real estate agents or presentations? I doations. I just closed a client alone just funded.

11:55 She's her husband passed away. She's in a five- bedroomedroom home with her dog and it's the maintenance on a five-bedroom home alone, her and the dog. I tried and the referral source who was her banker tried to convince her as well, sell and move. Oh, by the way, her homeowner's insurance is 11,000 a year. So, it wasn't making sense and I was I will not just take on loans. They've got to make sense for me. But she was adamant. I want to get She had $2,000. That was her mortgage payment. So, she's going to be saving that every month. We paid off the loan. But, and in fact, she had to come in with cash, meaning the numbers didn't work for her to get money out. She came in with cash. I showed her the numbers. After so many years, that re withdrawal that you did that's just sitting in the bank is now making your lifestyle better. Wow. Well, again, if any real estate agent on this call, I would urge you to find your preferred reverse mortgage professional. And Rosemarie is a great one who can help you understand this product well enough, and you'll need to know enough to do it. You'll need enough to sign the papers. You need enough to be able to call your customer, say, "Hey, I heard about this. Tell me about your plans, and is this something that might be a benefit to you?" And like I said, I have 100 customers, 95 will say, "I'm not." Some people I find are interested in learning about even they have no interest in that loan, finding out more about it and then they'll say, "Oh, by the way, we are selling our house." So these are the conversations we want to get involved with and Rosemarie is a resource to do that. Rosemarie, someone to get a hold of you. I know you have a website.

13:26 I'm going to put that up real fast. It's Rosemarie reverse.com and then has your phone number. Is that the best way to reach you? That's the best way to reach me. And there's about 12 to 15 videos on that on my website. And each one I call them a whiteboard video. And it's this little person talking and showing on the whiteboard all the subjects that are pertinent to reverse mortgages there. That's exactly what Bill just brought up. Yes, really good stuff. And down below in the banner is her phone number as well. Rosemariereverse.com is the website. Rosemarie Litoff is a certified reverse mortgage professional which means that she you know a lot of certificates are industry in my experience this only one that I've seen that's worth anything in related to real estate and I was yet literally yesterday at the national reverse mortgage lenders association western regional meeting where people go who are certified and they network and the learning it was really good it was really interesting stuff so Rosemarie thank you so much for your time today really appreciate having you on thank you so much for the opportunity and I look forward to speaking to people and then just educating them on the reverse mortgage world. Well, thank you. And again, this is Bill Gross. I do the Reverse Mortgage Podcast. We do it every week. We issue a new episode mostly originators who help customers get these loans, but also work with professionals to help them learn how to be more effective as well in building their business. Continue the conversation. We have a Facebook group, the Reverse Mortgage Podcast is the name of the Facebook group. You can go there and ask questions, look for referrals and such. I'm Bill Gross at Bill Gross Probate on social media. If I can help any way, please call, text, or email. Hope you like this episode.

15:05 Subscribe if you like it more. As always, make today your best day ever. Thanks so much.