Reverse for Purchase

Mortgage Rate Mythbusting: Destroying the most common misconceptions

August 5, 2025 by ReverseLady, posted in FHA HECM, Financial Planning, Laurie MacNaughton, Laurie McNaughton, Retirement Planning, Reverse for Purchase, Reverse Mortgage

Setting the record straight on mortgage rates and economic drivers

By Clayton Collins

Published by: HousingWire, August 1st, 2025

Bad takes about mortgage rates spread faster than wildfire—especially when they come from politicians or go viral on X. But when these narratives are misleading or flat-out wrong, they don’t just confuse consumers. They erode trust in our industry and inject unnecessary chaos into an already complex housing market.

It’s time to set the record straight on the most persistent myths about mortgage rates—some of which have been amplified by high-profile figures who should know better.

Myth #1: “One man controls all interest rates”

On July 31, Rep. Thomas Massie (R-KY) fired off this tweet: “It’s absurd that one man sets interest rates for a ‘free’ country. End the Fed.”

The tweet racked up 3.7 million views. It also fundamentally mischaracterizes how U.S. monetary policy actually works.

The reality: Interest rates are set by the Federal Open Market Committee (FOMC)—a 12-member voting body that includes seven governors appointed by the president and confirmed by the Senate, the New York Fed president and four rotating regional Fed presidents.

Jerome Powell may be the face of Fed policy, but he doesn’t set rates by decree. Policy moves are debated, voted on and shaped by extensive data analysis and institutional perspectives. The “one man” narrative isn’t just wrong—it’s dangerously simplistic.

Myth #2: “The Fed doesn’t control mortgage rates”

The reality: This one’s particularly insidious because it’s partially true, which makes it harder to debunk—but let’s agree that the statement by itself is filled with falsehoods. The Fed doesn’t directly set mortgage rates, yes, but its policies have massive indirect influence on mortgage pricing.

Most mortgage rates—especially the 30-year fixed—track closely with the 10-year Treasury yield. Fed actions like rate hikes, forward guidance and quantitative tightening directly impact investor expectations, bond yields and ultimately mortgage rates.

Fed Chair Powell made this crystal clear during a 2025 Senate hearing:

“Monetary policy works through interest-sensitive spending. There is no more interest-sensitive spending than buying a house and having a mortgage…. Our tighter policy is having an effect on economic activity in the housing sector.”

He added: “The Federal Reserve does not control housing supply, but its actions do have a massive effect on housing supply.”

Translation: The Fed isn’t pushing the button on your mortgage rate, but it’s absolutely adjusting the levers that move the market.

Myth #3: “Mortgage spreads don’t matter”

The reality: This isn’t a myth born from overt misinformation—it’s a myth born from omission. Most media coverage and political commentary stops at the 10-year Treasury or Fed Funds Rate. But mortgage rates are also shaped by the spread between the 10-year yield and the 30-year fixed rate.

This spread is driven by investor appetite, risk premiums and MBS pricing. Ignoring spreads leaves consumers with an incomplete picture.

As HousingWire Lead Analyst Logan Mohtashami puts it: “We’re starting to teach people mortgage spreads, and I’m really happy about that—because nobody knew what it was, but it’s so important.”

During periods of financial stress, spreads can widen, keeping rates elevated even if Treasury yields fall. The myth isn’t that spreads are fake—it’s that they’ve been left out of the conversation for too long.

Myth #4: “Higher federal debt means higher mortgage rates”

The reality: The federal debt has been increasing for decades, while mortgage rates have been declining over the same period. The recurring idea that bond vigilantes will punish the U.S. with higher mortgage rates due to federal debt has been debunked repeatedly.

In the 1990s, the federal debt was much lower, along with a lower debt-to-GDP ratio and smaller deficits, but mortgage rates during that decade were higher on average than from 2010-2025.

Mohtashami has pointed out that 65% to 75% of the variability in the 10-year yield and 30-year mortgage rates throughout an economic cycle is influenced by Federal Reserve policy, along with nominal growth and inflation expectations. The overall state of the U.S. economy also plays a crucial role in determining these rates.

Bottom line: We need smarter conversations

As misinformation and partial perspectives about mortgage rates swirl through the industry, professionals must double down on financial literacy. Mischaracterizing rate policy doesn’t just confuse consumers; it undermines confidence in the market and distracts from real economic issues. As I discussed with Sarah Wheeler on the recent HousingWire Daily podcast, consumer psychology is one of the leading factors in our current “stuck” housing market.

Mortgage professionals, economists and journalists all have a role in correcting the record. The path to affordability starts with understanding, and understanding begins with fact-based reporting—not viral outrage.

The housing market is complex enough without adding manufactured confusion to the mix. Let’s focus on what actually moves rates, not what gets retweets.

It’s a big down payment. But bigger than WHAT?

February 28, 2025 by ReverseLady, posted in Caring for Aging Parents; A Daughter's Story, Financial Planning, Laurie MacNaughton, Laurie McNaughton, Retirement Planning, Reverse for Purchase, Reverse Mortgage

I know this is a bit weightier than usual—but this conversation was SO profound that it needs recounting.

Brenda and her husband were due to retire in late 2025, and they had just downsized into a beautiful new home that was perfect for aging in place.

Four weeks after moving in Brenda’s husband died, suddenly and unexpectedly. Six weeks after THAT Brenda had a massive stroke and spent weeks in the hospital and then in rehab. Now she is deeply in debt and behind on her new “forward” mortgage.

Ironically, when I spoke to Brenda today she said she and her husband had asked their loan officer about using a Reverse for Purchase home loan to buy their new home.

The loan offer’s comment?

“You don’t want to do a Reverse for Purchase. The down payment is big.”

Big? Bigger than WHAT?

Bigger than NEVER falling behind on monthly mortgage payments? Bigger than being able to live in her own home—even after the loss of a spouse? Bigger than keeping her home even though she has had to retire ahead of schedule?

Brenda may have missed the opportunity to live in this home. I don’t know—but I do know her current plight was totally avoidable. I referred her to legal counsel in the hope something may work out.

Why am I recounting this really sad story?

Because it’s life. And because “life is what happens while you’re making other plans.”

A Reverse Mortgage is a home loan. But sometimes a Reverse Mortgage is not JUST a home loan. Sometimes it changes an aging homeowner’s entire future.

If you would like to discuss your plans—or the plans of one you love—give me a call. I always love hearing from you.

Blessings,

Laurie

Another loan officer said I don’t qualify for a home loan (or, Why you might qualify for Reverse Mortgage)

January 16, 2025 by ReverseLady, posted in Divorce, FHA HECM, Financial Planning, Laurie MacNaughton, Laurie McNaughton, Property Tax, Retirement Planning, Reverse for Purchase, Reverse Mortgage

If you are a homeowner aged 62 or older and are trying to refinance the home you’re in or buy a new home, chances are you know the drill: your income is fixed, savings may be limited, and your debt may be relatively high compared to your income. In other words, you are having a hard time getting a home loan.

So why, then, with the exact same financial profile, might you qualify for a Reverse Mortgage after you were turned down by other lenders?

Here’s why:

First, there’s never a mandatory monthly mortgage payment. That right there makes a huge difference. Take just a second and think about what a difference it would make if you had NO required monthly mortgage payment. You are always allowed to make a payment if you choose to do so.

Second, to qualify you only need a monthly residual income of $529 for a single person, and $886 for a couple. “Residual income” means the amount of money you have left over at month’s end after we account for your property taxes, homeowner’s insurance, HOA dues or condo dues (if applicable), and the minimum amount due each month on your credit accounts.

Be certain to note that no matter what kind of home loan you have – or even if you have no home loan at all – property taxes and homeowner’s insurance are still a monthly expense. Many aging homeowners have some kind of property tax waiver, and a reverse mortgage does not impact eligibility.

Even though this loan is specifically designed for homeowners and homebuyers aged 62 and older, not everyone is going to qualify. However, millions of Americans have chosen to use a reverse mortgage to either refinance the home they’re in or to purchase their aging-in-place home due to the financial flexibility it may provide.

If you would like to talk about whether a reverse mortgage might be a fit for your retirement plans, give me a call – I always love hearing from you!

Laurie

Reverse mortgage: an additional solution for resolving equitable distribution in Silver Divorce

November 7, 2022 by ReverseLady, posted in Caring for Aging Parents; A Daughter's Story, Divorce, FHA HECM, Financial Planning, Laurie MacNaughton, Laurie McNaughton, Retirement Planning, Reverse for Purchase, Reverse Mortgage

Equitable distribution can be among the most complex issues in any divorce. When the divorcing parties are aging adults, an additional layer of complexity may be involved.

Historically, there have been two solutions to equitable distribution: sell the marital home, or refinance the existing mortgage to clear the departing spouse from the note.

However, either solution may be suboptimal. If one party has impaired health, moving can be severely stressful. Additionally, homes currently for sale may be unsuitable if the individual parties are hoping to purchase. It also bears mentioning that because one party—or both parties —may experience a reduction in income following the divorce, obtaining a new purchase-money mortgage may not be within reach.

Similarly, refinancing a home can be difficult, or simply impossible, on one income.

Reverse mortgage overview

A reverse mortgage is a home equity loan. It differs from other home equity loans in that a reverse mortgage loan is not repaid until the last person on title permanently leaves the home. In other words, the homeowner can borrow some of their home’s equity without picking up a monthly mortgage payment.

Because this is a mortgage, it will eventually be repaid—but it is repaid on the back end, in reverse. Only the loan amount is repaid; all remaining equity goes to the heirs or estate.

Applicability to Silver Divorce scenarios

Spouse remaining in the marital home:

In cases where couples have been married many years, there may be equity enough in the home for proceeds from the reverse mortgage to pay the departing spouse’s portion of the marital share. At very least, reverse mortgage proceeds plus an additional cash payment to the departing spouse may make it possible for one partner to retain the property. This would be a Reverse Refinance scenario.

Relocating spouse:

The spouse relocating after divorce may face unanticipated challenges when looking to purchase. Common challenges include newly-reduced household income; unfavorable debt-to-income ratios; excessive credit utilization; and negative mortgage-payment history incurred during the marriage.

A strong option may be Reverse for Purchase. This purchase loan works in the following manner: the homebuyer provides a down payment, the size of which is determined by the homebuyer’s age. The loan provides the rest of the purchase price.

The general formula should sound familiar:

down payment + plus loan amount = purchase price of the home

However, unlike a “forward” mortgage, with Reverse for Purchase, there is never a required monthly mortgage payment—though the homeowner may make a payment at any time if s/he so wishes.

Not making payments is very different from saying the loan is never repaid. The loan is always repaid—it’s just not repaid on a monthly basis. Rather, the loan is repaid when the last person on title moves, sells, or dies. In other words, the loan – interest and principal—is repaid once the homeowner no longer needs the home.

Of course, a reverse mortgage will not work in every divorce situation. But in many divorces in which the divorcing parties are 62 or older, reverse mortgage may serve as an option for meeting the financial mandates of the Property Settlement Agreement and for meeting the housing needs of the relocating spouse.

Divorce is no one’s “Plan A.” But as the classic line goes, life is what happens while you’re making other plans.

If you have questions about how a reverse mortgage might help your client, give me a call. I always love hearing from you.

Rarely is a problem too large

December 14, 2021 by ReverseLady, posted in Caring for Aging Parents; A Daughter's Story, FHA HECM, Financial Planning, Laurie MacNaughton, Laurie McNaughton, Retirement Planning, Reverse for Purchase, Reverse Mortgage

It looked like it was heading for a bad outcome: Robert sold his mother’s home and placed her in a care facility.

The problem? Mom was on Medicaid, and her formerly exempt asset was now quite a large countable asset, which spelled big trouble for her care options.

Fortunately, Robert picked up the phone and called an elder law attorney, who listed buying another home among potential cures.

Because Reverse for Purchase has notably easier qualification guidelines, Robert’s mother qualified even on her limited income. And…yesterday she closed on a lovely new home. She is scheduled to move in shortly before Christmas.

Rarely in life is a problem too large. More often, solution sets are too small. In this case, Reverse for Purchase was the perfect fit for a problem that had few other solutions.

If someone you know is in need of options, give me a call. I always love hearing from you!

Bob and the stinky advice

March 20, 2021 by ReverseLady, posted in Caring for Aging Parents; A Daughter's Story, FHA HECM, Financial Planning, Retirement Planning, Reverse for Purchase, Reverse Mortgage

I’ll call him Bob.

Bob is an advisor with a mainstream financial services firm, and he and I have a mutual client.

I will call her Ellen.

Ellen is 78, widowed, and is selling her current home and purchasing a new home closer to friends and family. Initially she thought she would purchase using a traditional mortgage, but she couldn’t qualify due to insufficient income.

Her “forward” loan officer sent her over to my office, where I easily qualified her for a reverse for purchase home loan.

Enter Bob.

Without making the effort to acquaint himself with details of reverse for purchase, he proceeded to pick up the phone and call Ellen. For fully fifteen minutes he spewed dire warnings that she would lose all her money; that it was a terrible “investment”; that she would end up with nothing. In other words, he scared the daylights out of her.

And here’s the thing: if fifty people tell you the skittles are good, and one person tells you there could be a poisoned skittle, you’re probably not touching the skittles.

But suppose the person warning you about the skittles doesn’t have any data about whether one skittle was poisoned. It’s just something he heard. And he won’t revisit his hunch – but he’s pretty sure he’s heard of a guy who knew a guy who met a guy who got sick on a skittle.

I’m the first to say there is no one right financial product for everyone. There simply isn’t. But for many aging homebuyers, reverse for purchase is a fantastic option: they can get into an appropriate aging-in-place home without picking up a monthly mortgage payment. Or, like Ellen, it can make possible the purchase of an appropriate home when it otherwise was not.

In my many years as a reverse mortgage specialist I can honestly say I have run into not more than a couple Bobs. Financial advisors are well known for paying scrupulous attention to hard data, education, and their clients’ needs. And this is a darn good thing – because one advisor’s stinky advice can cause an awful lot of emotional upheaval, anxiety, and deep distress.

No one knows everything. Everyone needs input.

But fallacious input can be hard – very, very hard indeed – to un-hear.

If you have – or someone you know has – questions regarding reverse mortgage, give me a call. I am always available to answer questions, and I always love hearing from you.

Did you know?

May 3, 2018August 4, 2018 by ReverseLady, posted in Caring for Aging Parents; A Daughter's Story, FHA HECM, Financial Planning, Laurie MacNaughton, Laurie McNaughton, Retirement Planning, Reverse for Purchase, Reverse Mortgage

Did you know the average reverse mortgage borrower is not in financial distress?

Rather, the typical person doing a reverse mortgage is the retiring boomer who watched a parent’s financial situation later in life and is determined to avoid a financial crunch down the road.

And did you know there are two “flavors” of reverse mortgage, a refinance and a purchase?

Typically, the homeowner doing a reverse mortgage refinance is the baby boomer putting together a long-range financial plan. The homebuyer using a reverse for purchase is looking to buy a home without pinning down a huge chunk of cash or taking on a new 30-year mortgage during retirement.

A reverse mortgage is not mysterious, nor exotic, nor any more complex than any other loan. It is simply a home loan repaid when the last title-holder permanently vacates the property.

So if this looks like it fits your retirement goals, or the goals of someone you love, give me a call. I always love hearing from you.

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In a nutshell: how a reverse mortgage works

January 5, 2018July 31, 2018 by ReverseLady, posted in Caring for Aging Parents; A Daughter's Story, FHA HECM, Financial Planning, Laurie MacNaughton, Laurie McNaughton, Retirement Planning, Reverse for Purchase, Reverse Mortgage

Reverse mortgages…you’ve seen the ads a hundred times. But odds are you have a lot of questions.

In a nutshell, here’s the scoop

The first thing to know is a reverse mortgage is an FHA-insured home loan. I always start with this point simply because there can be confusion about the fact this is a home loan, in many ways not unlike any other loan we’ve all grown up with.

Here’s where the difference comes in: a reverse mortgage loan is repaid when the last person on title permanently leaves the home. In fact, the very name itself comes from the fact the loan is repaid in reverse on the back-end, rather than being repaid monthly.

The second thing to know is there are two kinds of reverse mortgages, namely a refinance reverse mortgage and a purchase reverse mortgage.

Reverse Mortgage Refinance

The best-known “flavor” of reverse mortgage is the Home Equity Line of Credit. It only differs from a traditional line of credit in that a reverse mortgage line of credit is not repaid until the last person on title permanently leaves the home. In other words, homeowners can borrow some of their home equity without picking up a monthly mortgage payment.

Reverse mortgage proceeds can be used for any purpose. Common uses include:

Financial safety-net in retirement
Healthcare
Home repairs or improvements
Paying off debt

This is an seniors’-only purchase loan, and it was designed as a way for homebuyers to purchase a retirement home without adding a monthly mortgage payment to their retirement budget.

Homebuyers provide a down payment (typically about 50% of the purchase price), and the loan amount covers the other 50%. There’s never a monthly mortgage payment due.

Buying a home with a Reverse for Purchase loan is an ideal way for homebuyers to double their purchasing power, and it is notably easier to qualify for this FHA-insured loan than it is to qualify for most other home loans.

Homeowner Responsibilities

With either type of reverse mortgage, because they still own the home homeowners remain responsible for:

Property taxes (unless property tax exempt)
Homeowners insurance
Homeowners association dues (if applicable)
Condo Dues (if applicable)

To explore how an FHA-insured reverse mortgage might help you or your client with retirement plans, give me a call. I always love hearing from you.

And…It’s Good News!

December 3, 2016July 10, 2017 by ReverseLady, posted in Caring for Aging Parents; A Daughter's Story, Financial Planning, Laurie MacNaughton, Laurie McNaughton, Retirement Planning, Reverse for Purchase, Reverse Mortgage

So, first the technical mumbo-jumbo (and it’s good news): FHA just announced the Reverse Mortgage loan limit will go up to $636,150, effective January 1, 2017.

Why You Care

Starting January 1, homeowners aged 62 or older who have higher-value homes (i.e. homes that appraise for $636,150 or more) will have access to more equity – potentially meaning a bigger line of credit or a larger monthly stipend.

Reverse for Purchase

For those looking to purchase a home using Reverse for Purchase, this new lending limit means homebuyers may be able to consider extra aging-in-place amenities or other upgrades.

Rates Are Low, Housing Values Are Strong

If you are considering a Reverse Mortgage, now is a really great time to move forward, as you may qualify for more than ever before. So give me a call – I always love hearing from you!

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The Old, Poor, Sick Fallacy

April 19, 2016 by ReverseLady, posted in Caring for Aging Parents; A Daughter's Story, FHA HECM, Laurie MacNaughton, Laurie McNaughton, Retirement Planning, Reverse for Purchase, Reverse Mortgage

As supper came to a close my engaging dinner companion surprised me – not because he said something I hadn’t heard before, but because I hadn’t heard it for a long time.

“My clients aren’t candidates for reverse mortgages. Reverse mortgages are basically for the old, poor, and sick.”

There is certainly no dearth of data on the matter, so I was somewhat taken aback by my colleague’s settled declaration.

Fact versus fiction

So what do the data show regarding homeowners who take out reverse mortgages?

Nationwide statistics show that homeowners with higher than average incomes, and above average educations, tend to take out reverse mortgages at an earlier age than do homeowners with lower income and education levels. Part of the reason for this is access to better information, such as Dr. Wade Pfau’s report in last month’s Forbes Magazine:

[Researchers] found that using the standby [reverse mortgage] line of credit improved portfolio survival without creating an adverse impact on median remaining wealth (including remaining home equity). This provided independent confirmation that the reverse mortgage line of credit can help mitigate sequence of returns risk without impacting legacy goals.

Though wealth managers tend to be well-informed about recent retirement research, many of our oldest, poorest, and sickest are not actively working with financial planners. On the other hand, regions of the country with the highest home values and the highest education levels also have the greatest numbers of homeowners originating reverse mortgages while in their 60’s, well before they need access to the funds.

Inaccessible wealth

Most Americans have the majority of their wealth tied up in their home – a dynamic called asset illiquidity. Reverse mortgage, fundamentally a home equity line of credit, is designed to enable homeowners to access some of that equity, while not obligating them to a monthly payment. And, in what is perhaps the least known feature of the reverse mortgage line of credit, the credit line accrues a compounding growth rate. This means by the time the homeowner does indeed need access to a safety net, in most cases that safety net has grown appreciably.

Reverse mortgages are not a fit for everyone – no one financial product is.

But a reverse mortgage is going to play an important role in many homeowners’ financial health in retirement, particularly when used as part of a sound, informed, long-term retirement plan.

For more information on how an FHA-insured reverse mortgage may help with your clients’ long-term financial goals, give me a call. I always love hearing from you.

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Category: Reverse for Purchase