What Happens to Your Home Loan When You Move Out?

In this Podcast Episode 66, Derek Dombeck interviews mortgage expert Kevin Guttman. They explore Kevin’s journey from real estate upbringing to ministry work, and eventually into the mortgage industry. The core of the discussion centers around reverse mortgages—how they work, who they’re for, and why they can be an overlooked but powerful financial tool. The two also dive into market trends, economic outlooks, and how investors can creatively use reverse mortgages to fund deals and generate wealth.

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And here he is Mr Kevin Guttman thank you so much for being here with us um if you wouldn’t mind start us off a little bit of background who are you where do you come from and and uh what are we gonna talk about today awesome thanks derek yeah you know i grew up in southern california five minutes from disneyland i say that i was uh five minutes from disneyland ten minutes from Knott’s Berry Farm, 15 minutes from the beach. Dude, it was awesome. So my dad was a realtor and an investor in Southern California. So even as a little kid, I used to go with him and look at property and he taught me about real estate, buying a good neighborhood with parks and schools, near shopping, don’t buy a house with a double yellow line, always buy a 3-2 or better, buy the smallest house in the best neighborhood, that kind of thing. So I just always, real estate’s always been a part of my life. When I was an adult, I started buying real estate and have owned real estate, I’d say almost my whole adult life. And when I started my career, I was a minister. I used to travel around the country, speak in churches, meet with donors and raise money for people in the, in poor parts of the world. So they could have clean water, medical clinics, school, small business loans, et cetera, and got to travel internationally as well. It was very rewarding work. I met some amazing people, but my wife and I have five kids and I just needed to be home where I wasn’t home enough. I was gone about half the time. So I left that the end of 2002. She has a real estate background as well. We started flipping houses, ultimately got in the mortgage industry 21 years ago. And so here we are today.

So you got in the mortgage industry and then you went through the mortgage meltdown. And a lot of my listeners that follow me regularly, they know that I got my butt handed to me in 2007, 8, and 9. How did it affect you in the mortgage business? It was really rough. It was like, I mean, the phone wasn’t ringing. Everybody was scared, not doing anything. When people have fear, they don’t make financial decisions or big decisions. And there was so much uncertainty. I actually looked at getting out of the business and either going into commercial real estate or insurance. And I was down the road quite a bit with both of those at different times. And then the market started to come back. And so, yeah, we made it through. But it was like, in a biblical term, it was like a famine or a drought. It was really very, very challenging.

Yeah and we were in the same boat um we we did everything with bank financing or mortgage brokers and and and when when you have no control over your business and all the people that you worked with are escorted out of the office or like offices were shutting down daily and yeah it was it was brutal and and i i like to bring that up because when i i talk to somebody on the show that’s been in the business that long, you know, there’s many listeners that they just got started the last few years, even up to 10 years, they’ve never seen a drought. They’ve never seen. And I think, you know, we’re definitely going to be talking about reverse mortgages and how we can use those as tools. But because you and I now have a similar history of time in this business, what do you see today with what’s happening in the current economy? And we’re not going to get political. I mean, not that I wouldn’t, but that’s not where I want to go with this. I want to go over the consumer confidence. You talked about when people are in fear, they won’t make big decisions. And as we’re recording this right now, we’re in April. So what do you think is going to be happening with the tariffs and the current administration’s business plan as it relates to real estate and mortgages or anything else you want to talk about? Yeah. So anytime you can cut expenses, that’s a good thing. So you’ve got Doge doing that. Anytime you can cut taxes, that gives people more money and then they spend more money. And any time you can, what I would say is level the playing field. So President Trump’s talking about these countries that have been putting tariffs on us for decades. We haven’t been reciprocal. And now we are. So I think it’s short-term pain for long-term gain. You know, we don’t have a lot of choice. Elon Musk said recently that if we don’t do this, we’re bankrupt. We may be bankrupt now.

I believe we are, actually. So, you know, what are we passing on to our kids? Is there even going to be in America? So I think ultimately they’re challenging things, but they’re good things. The other thing I’ll say about the market is we’ve got the millennials coming through right now, 80 million of them. And the average first-time homebuyer is age 37. And so you’ve got these millennials that are early on in their home buying process. And they’re going to be buying houses for decades to come. And that’s going to help all of us because supply and demand, not enough supply, more demand drives up prices. Estate bubble, I just don’t see it. I really don’t. Builders cannot keep up with the demand for housing. Down, more people can qualify. More people qualify by houses, again, drives the price up. So bad interest rates or high interest rates may not be that bad because that’s actually stabilizing the market. The market’s pretty balanced right now. And then with your business and your listeners, there’s always going to be people. Life hits them and they’re not prepared. They’re going to have to sell quickly. Death in the family, divorce, loss of job, right? These life events happen and people are always going to need to sell. There’s always going to be a market for people who do what you do as well.

Well, and currently there’s people that nobody has a crystal ball. Everybody’s thinking that interest rates are going to drop. And I’m torn on that. I don’t actually think that interest rates are going to drop. And if they do, I think this is part of the administration’s plan, which is not a bad business plan. We get turmoil in the market and the Fed drops the rate and they can essentially refinance our debt. at a lower cost and then stimulate the economy again, that’s not a bad business plan. But that’s, that is going to and is creating a lot of stress and challenges for part of the population. But if we sit and do nothing or continue to do what we’ve always done, again, I do believe we are close to bankrupt. Maybe we already are as a country. So this was not what we were going to talk about but this is why i like the free flow of how how we have this show you know the good has really smart people around him and he’s smart himself a businessman a billionaire so i mean if anybody can can turn the country on economically it’s probably him and the people he’s surrounded himself with is it going to happen overnight no interest rates go up fast, they come down slow. And, you know, there’s lots of things to fix. I mean, the debt is just one of them. But like you said, we got to start. And, you know, he has the courage to do it. So good for him.

Yeah. And ultimately, he’s got three and a half more years and he’s done anyways, he’s got nothing to lose. So hopefully he’s doing the right things. And we all can see that in the future. But where are you at in the mortgage world? What do you think is going to happen with short term? What’s going to happen with rates? I’m sure you get asked this every day of your life. And what do you think long term? And then let’s get into more specifics on how we can use the mortgages and reverse mortgages as tools. Yeah. So just one more comment about the economy, if I could. I remember when President Reagan came in, do you remember he inherited high interest rates and high inflation? You remember that? Yeah. And he made some really tough decisions. And we had a couple of years that was really hard. And then the last few years of his two terms, I mean, the economy was probably the best we’ve seen up until when Trump got in. So you asked about interest rates. I do think second half, they’re going to start to come down. Second half of this year, they’re going to start to come down, 2025. I do think long-term, we’re not going to see rates into twos and threes again, perhaps even in our lifetime. I think the market is going to continue to be strong, the demand because of the millennials. There’s 80 million of them and they’re early on in buying and the builders cannot keep up in any market really. One thing we are seeing, it’s interesting phenomenon, I have a friend that tracks this kind of thing, writes a blog, but people are moving from blue states to red states because the blue states have high taxes, cold weather generally, very general statement, but they’re moving to warmer climates like Tennessee and South Carolina and Florida and Georgia and Texas. Cheaper to live, cheaper taxes. Ultimately, they have more money to enjoy in their golden years. So those are some things I’m seeing, even in Colorado. I’m in Colorado Springs. I’m seeing people move to warmer climates, Arizona and Texas and Florida. So, yeah, we’re a blue state and we have a net loss of people. In other words, more people are leaving than coming for the first time last year in several years. Well, and the challenge is they move to these red states, but they take their blue state mentality with them. And then eventually, right, there’s pockets, then those pockets grow. And now they’ve got high taxes and all the stuff they moved away from. But again, we’ll go on to mortgages. It Reminds me of my first day in economics class in college. The professor wrote on the board, Tans to Fall. And he goes, who knows what this means? None of us knew first day of college, you know, or anything. He said, there ain’t no such thing as a free lunch. And he just went on to lecture for an hour about how nothing is free. We all want free, but nothing is free. somebody pays and i think that’s kind of seeped into our culture like oh i can get it for free with the last few years right and is this not true there’s nothing free

We have a participation trophy um segment of our population that worries the heck out of me for the future and I guess time will tell but they’re they’re obviously brilliant in their own right and electronics and internet and all of that stuff that wasn’t prevalent for us but who’s going to build the buildings who’s going to you know change the oil who’s going to do the the blue collar types of jobs. I don’t know. Because that generation, that’s not what they grew up doing. But all of our generations before us probably said the same thing about us. So it’s evolution. Well, you asked about mortgages. One of the reasons I’m passionate about real estate and about mortgages is leverage. So somebody can put as little as 3% down on a conventional loan for a first-time homebuyer and get into a home. And oftentimes their housing expense is lower than what they paid in rent. National Association of Realtors recently came out with a study and they said homeowners have a 40 times higher net worth than renters. So really what we do is we help people build wealth by leveraging real estate on the traditional mortgage side. And then we can talk what that looks like on the reverse side too, if you want.

Yep. So you mentioned a lot of the generations that you’re probably working with are the people that are aging out who are going to use the reverse mortgages. And then you’ve got the next generation of homebuyers in their 30s. And then you’ve got my generation right in the middle. of what I think is the best generation, but I’m probably biased. So I just turned 49 a few months ago, not ready for a reverse mortgage, not a fan of traditional mortgages because I run a company all funded by private investors. What do you see as the advantages of all of them? But let’s go to the reverse mortgage. So obviously each one does have advantages. So traditional mortgages, if somebody has a two-year job history and the debt-to-income ratio works and the credits is sufficient, they can put as little as 3% down, buy a house, start building wealth. I’ve used private money as well when we were investing in real estate. And I’m a fan of that because it’s a good yield for the investor. The collateral is the house, so the investment’s protected. And there are seasons when you need that, you know, where it’s faster. You don’t have to go through underwriting. I mean, you’ve got people saying, I’ve got this property. I’ve got need this amount. This is the return you’ll get. You’re protected with the deed of trust. Boom, the money shows up the next day. You pay cash. So that’s huge. With a reverse mortgage, I always encourage people, by the time you turn 62, Make it your goal to have your house paid off. Why? Because that’s when you can get a reverse mortgage. And then what does that look like? Well, there’s three primary ways that people use it. Most people, two-thirds of people, use it to eliminate their monthly principal and interest mortgage payment. That in and of itself is huge. Somebody’s on a fixed income, we take their largest expense out of their budget, and they can have some breathing room, sleep better at night. So there’s a good use of it just right there. The second way is what I’m advocating. with you and your listeners. Own your house by the time you’re 62 because now you can access your equity tax-free. A loan is insured. It’s protected from a market correction. You can get a portion of that equity. We’ll just say 35% today because interest rates are near a 40-year high. So somebody has a $500,000 house, they can borrow 35% of that, which is 167. Now, interest rate, the growth on that we’re just going to say is 7% a year compound interest. So in 10 years with the rule of 72, it’s pretty close, 10 years and a couple months. That 167, if they don’t use any of the money, now is doubled and is 334.

Now they’re 72. They have access to $334,000. And again, if they let it ride, 10 more years. Now they’re 82. Now they have 668,000. That’s one way to do it. Another way to do it is they actually start using that money. So you have real estate investors on your program. So let’s say somebody says, I’m going to take that money and I’ve got two kids and I’m going to go buy an investment property for each of those kids that they’re going to inherit. When I pass, the rent is going to pay the mortgage. So basically you’re leaving them in inheritance, leveraging the equity you have in your house. By the way, reverse mortgages have no payment. How they’re different than their traditional mortgages, no monthly payments required. It’s a non-recourse loan, which means they’re not responsible to pay it back. The only way the lender can be made whole is by sale or refinance of the home when the last person moves out. And you can have a line of credit that grows in your favor. So that’s the third way that somebody can use it. So let’s say now they have, again, all this money available to them, right? They own the house outright or they have a lot of equity. And they can let this line of credit grow by compound interest, tax-free. And when they draw the money out, it’s not taxable. So those are the first two ways people use it. And I’ve got stories to tell how people have used it. But let me hit on the third way real quick. Somebody can finance a home with a reverse mortgage. so Derek you know you’ve got people that have lived in their home 10 20 30 years raised their kids there now they’re empty nesters and maybe that home doesn’t suit them in this stage of life anymore might be too big might be too hard to maintain or manage they don’t want to mow the lawn or shovel the snow anymore or maybe they can’t navigate the stairs up and down so they can right size they sell that house they put one large down payment down they buy a newer house with updated amenities and the part of town they want to live in without a mortgage payment. One big down payment, we’ll call it 65%, no monthly mortgage payment. Now they’ve just improved their living situation where they have a house that better suits them in that stage of life and they have no mortgage payment. Maybe even a safer neighborhood that they’ve moved into. So those are the three primary ways that people use it. And we can talk about advanced strategies too on how people can use it even at the next level if you’d like.

Yeah, I know there’s a strategy of being able to overfund a reverse mortgage, but maybe you could go into that a little bit. Yeah, that’s a good question, actually. I’m glad you brought it up. So I’ve actually had clients do this, and it’s in my book. I write about it. I just finished a book of reverse mortgages, change my life stories of how my clients have used reverse mortgages. So this one couple I’m thinking of sold their house and took that money and did more than the down payment. They put $100,000 extra into the loan because they said, look, we don’t want the money in the market. We’re 74, and we don’t want that risk. We don’t want to worry if the market’s going up or down. We want a stable return, 7%. It’s insured. And so now they didn’t have, this is one of their primary motives. They didn’t have long-term care insurance. And you probably are aware about 12% of people have it. Two-thirds of people are going to need it. And we always think of long-term care. But most long-term care insurance starts in the home. We bring in people to help us bathe and dress and run errands and clean and cook. And that’s how most people use it to start. So that’s what they were going to do. They said, look, we’re in our mid-80s. We’re going to need some more help, potentially. We want to have this pot of money that we can draw on, in their case, it’d be about $200,000 at that point, that we can pay for people to come in and help us. So overfunding just means you put more down than the down payment. You overfund it to where you have this line of credit that can grow by compound interest, tax-free, insured, protected from the market. And when you need it, you switch it to monthly payments or lump sum. Again, it’s all tax-free. So that’s a great use of a reverse mortgage. And a lot of people don’t even know you can use it that way.

Well, in my mind goes to finding people that in the private investor world, right? It’s not uncommon for us to pay double digit returns to our investors. And we all try to find people at seven, eight, 9%. But if we were paying somebody 10%. I just got off the phone before we started recording with a lead on a elderly couple, just like you’re talking about. They’re ready to downsize. They’ve been in this home since 1980. It’s way too big for them, has the stairs, free and clear. It’s always been free and clear. They paid cash for it in 1980. And as we’re talking this through, to me, that’s a strategy. They could they could go into, if they want to keep that home, a reverse mortgage and take that money and lend it out and be getting a spread and an arbitrage. And I mean, we talk about doing that with life insurance policies and other, obviously retirement accounts and other things too. But, but I don’t think anybody really ever talks about that as a possibility using a reverse mortgage line of credit or what you’re describing to become a private investor.

And I wrote a blog on my website about how permanent life insurance is similar to a reverse mortgage. And there are parallels. They’re both tax-free. You both can borrow against the equity or the cash value. And it’s a good parallel. And it’s a good strategy for somebody, actually, because, again, the risk is pretty low, especially if they work with an experienced investor like yourself and your listeners who know what they’re doing and they’re secured with the deed of trust and why wouldn’t they want to get a high yield i mean i had one lady the other day she goes i’ll just take the money and put it in the bank i’m like why would you do that 0.01 don’t do that you know but there’s guys like you out there who can pay you know 9 10 11 whatever it is and give them a good yield they don’t have to worry about anything, that check just shows up every month in their bank account. And they’ve got the peace of mind that the property secured with the deed or trust. I mean, it makes total sense. And yes, oh, this is what I was going to say. The only restriction the government, it’s a government loan. The only restriction the government puts on the proceeds is they can’t buy an annuity. That’s the only thing. They can do anything else they want with their money.

Okay. Now you had said something earlier and i’ve had a different guest on in the past about reverse mortgages but but not about how we’re using them here um you said until the last person moves out so that’s when the bank can come in essentially liquidate the property and get their money back how do they define last person is this marital property only husband and wife or is is there survivors that can uh um you know do anything yeah it is um they don’t have to be married it can be two borrowers um but when the last borrower moves out permanently they’ve they’ve left the home they’ve either passed on or they’re They’re living somewhere else. That’s when the loan becomes due. And then either they or their heirs or their estate have up to six months to sell or refinance the property. The existing loan balance is paid off. And whatever is left goes to the borrowers or to their heirs or to their estates. One thing I want to just elaborate on, if I could, for a second, Derek, is I said earlier these are non-recourse loans.

What that means is no debt can ever be passed on to the heirs or to the estate. Unlike traditional mortgages where we’re personally liable to pay the note back, that’s not true with a reverse mortgage. It’s a non-recourse loan. And that’s what makes it expensive. So one of the things that people say is, well, what’s the downside with a reverse mortgage? It’s expensive. And the reason it’s expensive is they have mortgage insurance. 2% of the value of the home is charged enough for a mortgage insurance. So on a $500,000 home, that’s $10,000. Now, these fees are rolled in. They don’t have to write a check or anything. But that makes the loan expensive. It’s not just a normal loan charges. There’s also a mortgage insurance. So that is one of the drawbacks. Another one would be there’s going to be less equity at the end. And when I meet with people, I always ask them, I say, well, if you don’t do this, what are your options? What are you going to do? I haven’t thought about it. Well, you could sell, pay the realtor 6%, which is more than a reverse mortgage. A reverse mortgage is 3% to 4%. You can go rent. You can go live with your kids, and they always grow when I say that, and they don’t want to do that. Or you can do a cash-out refi or home equity line of credit and have a monthly payment. Or you can do the reverse mortgage. Stay in your house, maintain your independence, retain ownership of title, entertain the lifestyle you’ve dreamed of and worked for, and not have a monthly mortgage payment. And then they usually say, it sounds too good to be true. Well, and there is pluses and minuses to every program out there and every option you just said. They may be able to afford just doing a cash-out refi instead of a reverse mortgage at the time they take it out. But 5, 10, 15 years later with inflation, now they can’t afford that payment anymore and they’re getting forced out of their house anyways or forced to sell. So there’s definitely positives that have to be looked at.

Every situation is different for sure. No one size fits all. Yes, yes. Well, and that’s why we like having all the different tools in our tool belt, right? Like I know that I’m not eligible for reverse mortgage, but that doesn’t mean that I can’t use what we’re learning right now in the example that we’ve already discussed to help somebody else and potentially turn them into an investor. So everybody should know. Nobody has to be an expert in reverse mortgages, but they need to know who can I talk to. And that’s the whole point, right? You’ve got a book out there. There’s reputable people that we can put into our network and help our own businesses and everybody helps each other. That is literally the point of having a network. So here’s one strategy that we’re going to tie into what you were just talking about a second ago. Going to somebody who has a reverse mortgage that has a low balance and they have money they can borrow that they can lend to you to buy more real estate. So, you know, people can go to a title company or a list provider even and just buy a list of people who have a reverse mortgage. Now, the tricky part is going to be you’re not going to know what the balance is because with reverse mortgages, is the full amount is recorded of what’s available. So they may have borrowed very little, but the full amount’s recorded. You’re not going to know the difference.

Right. There’s no way to know. But you send them a postcard. You say, hey, what if I could get you double-digit returns with a property secured by real estate? Get a check every month, deposit it into your account electronically or automatically. If you want to have a discussion, give me a call. And you’ll pick some up. You’ll pick some people up that, you know, don’t want to put money in the bank and earn 0.01%. Well, this is something that I get into conversations with people all the time. I put out a negotiations training called No Means Not Yet. And we also do a twice a month Elite Negotiations Academy. And what that is, is we’re reviewing people’s recorded negotiations, and that always spurs conversations about deal structuring. And I love, as my listeners know me, I love creative deal structuring. And when you’re talking about having this tool in your tool belt and all these other tools in your tool belt, like it just sets you apart from everybody else, right? It’s not just a big damn hammer and this is the only way I can buy a property is all cash, close quick.

Everything looks like a nail. Yeah. And so one of the stories I tell in my training is I had a lead years ago and we’re going back about four years probably. And this is when I co-owned a lending company, hard money lending company. And I knew within the first five minutes there was no way I was going to buy this guy’s house. It was pristine, full retail, wasn’t going to happen. So we turned the conversation into investing. And I led him down the path of, you know, what do you typically get for returns and what you have otherwise. Start telling him what I paid our investors and our lending company. And I said, hey, I’m obviously not going to buy your house today, but somebody will. And this was a $340,000 house that he owned free and clear. and I said at the time that you sell would you be interested in chatting about potentially investing with me and so I followed up when we agreed on a date I put it in a calendar I followed up with him on that date and he was closing six days later and he he put three uh I think it was three hundred thousand dollars into our fund and within six months he added half a million to that So the reason I tell that story is because you may find somebody that you can work with on this reverse mortgage strategy or any other strategy. That doesn’t mean that’s maybe all they have to work with or they may have other friends, right? They could live in a community of people that as long as you treat them right, the way you should, you never know what that postcard or that question can lead to.

Agreed. well kevin um i i really appreciate it like said we we don’t script our shows and the first part of this show which was fun because i i just like to get other people’s opinions on our current economy and what you’re sharing about the reverse mortgages um how can people find you if they have questions or they want to work with you you know um i appreciate the opportunity derrick and I always tell people, you know, whether you do one or not, do a reverse one or not, you need to learn about it. You need to understand it. And Dave Ramsey is not a good source for this. Neither is Susie Orman. They’re wrong. They’re incorrect. They’re inaccurate. They’re outdated. The Internet isn’t accurate oftentimes because it has information pre-2015. When the program changed, it became safer. So I have a website which has got a lot of great resources on there, videos and FAQs. quizzes and there’s a consumer guide which somebody may want to go and read. And if you read that, you’ll know more than 98% of people in America about reverse mortgages. And that site is reversemortgagerevolution.com and poke around there and there’s a lot of great tools and things that will help people. Again, even if you never do it, you need to understand how it works because you’re going to encounter people that have it. And I always smile because after I meet somebody, they’re all excited and they go tell their friends or family or pastor or neighbor or whatever. And that inevitable advice is, oh, no, you shouldn’t do that. You’re going to lose your house. Well, that’s not true. As long as it remains the primary home, they maintain it. They pay the property tax and insurance on time. The term of the loan is 150 years. In other words, somebody cannot live it. So people mean well, but they just speak inaccurately about things they don’t really understand or don’t really know. So learn about it for yourself and see if it’s a good option for you. And don’t trust your uncle’s neighbor’s cousin’s best friend who doesn’t know anything.

That’s a fact. And I will tell you the calls that I get asking about reverse mortgages are typically newer investors who found one that’s being foreclosed on and they’re asking if they can short sale it. And I’m like, that’s not the point of a reverse mortgage. They’re not going to take a short. They literally gave out the loan to let it accrue. But that’s usually the depth of how far, you know, our community of investors goes. And so it is definitely important to know the facts instead of the fiction. Great. Yes, sir. So, well, Kevin, I appreciate you being on. And, you know, everybody that’s joined us today, you got a little treat because we talked a little politics. I think it’s pretty clear where Kevin and I probably stand, but that’s fine. Everybody has the right to their opinion. It is America after all. So again, Kevin, thanks for being here. For everybody else, appreciate you following the show. Please do anything you can to spread this out to your community. Share it. Give us all the likes and the love and everything we need on social media. And until the next one, thanks for being here. See ya.

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About Kevin Guttman