Reverse Mortgages

The Senior Psychology of Reverse Mortgages

by Robert C. Trommler

As a veteran of the reverse mortgageloan ranks, I've spoken with hund Ðdreds of senior homeowners about this loan program. And in the process, I've noticed something fascinating that is common to most of those conversations. Seniors have many predictable questions about the details of this loan program. Details such as:

¥ This is an equity loan that requires no repayment as long as the borrower lives in their home.

¥ Minimum borrower age is 62.

¥ The loan makes a portion of total equity available to the borrower based on age.

¥ The available funds are tax free and can be arranged in a line of credit, monthly payments or lump sum distribution.

¥ A reverse mortgage will not subordinate to an existing mortgage and must pay-off any existing liens before available funds are paid out.

¥ The property title always remains in the borrower's names.

But it's the perspective from which these clients ask such questions that I find so fascinating.

To have an appreciation of where their questions may come from, we should first consider the life lessons and events that have helped to shape their perspectives.

Events such as a world war (or two), the remnants of a depression, a series of political and business cycles, the disappearance of pension plans and uncertainty of social security. Then ferment this mixture of ingredients over many decades. ItÕs enough to make even the courageous and bold a bit faint of heart. Especially when it comes to them making important financial decisions.

Now we complicate that with the design issues and popular myths of the reverse mortgage. Issues, such as adjustable interest rates, fees and costs sometimes being higher than conventional financing, thoughts like it sounds too good to be true, and myths about whether the bank really gets to keep the home after we die?

As a senior home-owner starts to consider a loan program that they are mostly unfamiliar with, but have likely heard many questionable things about, is a case of mental gridlock that ensues any surprise?

While a reverse mortgage loan officer is trying to educate their prospective borrower about the benefits of the loan program, the perplexed senior is trying to listen through the filters of all their years of life lessons.

Which begs the question of how do we manage to originate any of these loans at all?

At this stage of the process, to focus on the program's nuts and bolts without taking the senior's filters into account is an irresponsible act by us as financial professionals. We are not addressing a critical block to a possibly beneficial process.

How do we take responsibility for this situation?

If we are truly acting in our client's best interests, we need to be responsible not only for educating them and answering their questions. But we also need to take their disposition and perspective into account, which takes empathy and patience.

WeÕre not going to change or erase decades of mental programming in a single meeting with our candidate. But, like walking around a sculpture and taking in every nuance, a change in perspective can help us to appreciate beauty that we didn't know existed.

And a change in perspective can be started by asking a simple question. What if?

It's the stuff dreams are made of. Humans tend to dream within the limits of our resources. Certainly, humans can mentally figure out the facts and figures of how this loan program works, but it takes a heart to dream.

So when your reverse mortgage candidate tries to dream with their mind, all is usually lost. Whatever possibilities they may have imagined will evaporate if they get logical about it.

Any benefit they would ever have received from eliminating their mortgage payment or even having access to significant funds to transform their retirement years will disappear.

I've watched it happen too many times. And their dreams vanish into golden years spent having to do without. Which is something most of their generation have learned to do all too well. Doing without.

Doing without money for medical treatments or in-home care, medicine, car repairs, or home remodel; helping the grandkids with college tuition; taking that dream cruise; making a donation to a favorite charity or church; or most troubling, doing without peace of mind.

So let's help them build a compelling dream that will give them the incentive and courage to take that step, to get a glimpse of what could be. That begins with them giving themselves permission to do something out of the ordinary.

So many of us are still waiting for that a father or mother figure to give us permission to do what we hesitate to do. But at age 60, 70, or 80, who would that person be? Are we (or they) still waiting? You'd be surprised, many are.

Like the rest of us, seniors are creatures of habit. They're only doing what they've always been taught to do. What's wrong with being a little conservative? Not a thing, unless it causes those fragile new dreams to drift from view.

So another step in the process to shift their perspective to see a different future is to give themselves permission. For many things.

Like letting their homes bear part of the burden for funding their retirement years. Have it be okay to a place deep down in their hearts and souls that an investment they live in will cover some of their retirement costs. After, all, a home is just an investment. And what prudent investor doesnÕt just expect a good return on investment, they demand it. Why not sprint through the tape at the end of the race of life, happy and satisfied we gave it our best. Rather than coasting, or worse yet, having the brakes on!

And maybe most importantly, give themselves permission to think differently. Not only for the sake of it.

The results of a different way of thinking may have an impact down the years that could never have been predicted. Choosing a different destiny. That's how legacies are created. And wouldnÕt that be a grand example to leave the generations of a family?

And as if there aren't already enough valid reasons for seniors to consider a reverse mortgage, let's add another that is not frequently talked about. Estimates are that as many as 28% of Baby Boomers are helping their parents out financially because the seniors can't make it on their own.

On the surface, this is already a tough situation. But, below the radar, this condition can have devastating effects on family relationships.

Most seniors come from a generation of fiercely proud and independent people. They are accustomed to being self reliant and are very reluctant to take what they might consider hand-outs . Especially from their children and families.

Those characteristics then crash head on with Baby Boomers that are trying their best to save for their own retirement goals while raising and supporting children. This is a situation that isnÕt openly discussed at family get togethers. It is pushed under the carpet and discussed in private, if at all. Checks are usually written, given, and received with insincere smiles and nervous laughs or not acknowledged at all. It's a recipe for shame, embarrassment, resentment and even anger.

But when a reverse mortgage helps a dependent senior to reclaim their financial independence, the effect can transform family relationships.

Seniors can, once again, be self supporting and regain their sense of independence and dignity. And Boomers can have their own financial goals restored, all because the trapped equity in the parent's house can be released and put to good use without them having to leave their home. It's a wonderful thing.

So at first blush, the reverse mortgage phenomenon may look like just another financial option for senior homeowners to supplement their retirement years. But don't be deluded by the casual glance. If you take the time to look deeper, you may discover an opportunity to conduct some highly respectful business and to significantly change a life or two in the process. There are worse things to have accomplished at the end of your business day.

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Robert C. Trommler is a Reverse Mortgage Loan Officer. He can be reached at 877-760-1776 .