Can Reverse Mortgages Compete with HELOCs?

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HELOCs hold hidden pitfalls for many senior homeowners

In the last decade more senior homeowners have leveraged their home’s equity to fund their retirement years. For many it was refinancing their home for lower payments, others opened a home equity line of credit, while some chose a reverse mortgage. The most recent evolution of the federally-insured reverse mortgage significantly front-loaded loan costs which will impact the attractiveness of the HECM as a HELOC alternative.

Despite its higher upfront costs, seniors should strongly consider the long-term costs and risks associated when taking out a home equity loan. TransUnion expects that nearly 10 million homeowners will take out a HELOC in the next five years. Deja vu anyone? During the housing boom, HELOCs became the preferred way for homeowners to tap into their equity. Few, however, were aware or carefully considered the consequences of such a decision overlooking the limited draw period during which one could access the funds and more importantly, the repayment period when many homeowners experienced payment shock being required to make interest and principal payments. According to an October 2016 report from TD Bank, 33% were unaware of the HELOC’s reset provision. That number spiked to 42% for seniors. Even more concerning is 34% believed their payments decreased after ten years during when the loan reset, not knowing they would be paying significantly more.

The inconvenient truth is that seniors suffer the most having limited financial resources or a fixed income when taking out a HELOC, not fulling understanding the loan or having a plan to absorb increased future payments.

Download the video transcript here.

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Surveys That Sell

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Online surveys are a great source of potential leads

If there’s one thing people love to do online it’s to share their opinion. Why not leverage this tendency by inviting your reverse mortgage prospects to take a survey? It’s a great way to open the conversation and generate some quality leads.

*There is no transcript for today’s episode*

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The Art of Positive Living

A few days after class registration opened at Yale this winter, nearly a fourth of all undergraduates were enrolled in a psychology course called “Psychology and the Good Life.” It seems happiness is more important, from youth to old age, than any other life attribute.

The young are often less happy because “in high school, they had to deprioritize their happiness to gain admission to [Yale], adopting harmful life habits that have led to the mental health crises we’re seeing” on campus, opines the Yale professor teaching the course.

Agrees one student, “A lot of us are anxious, stressed, unhappy, numb. The fact that a class like this has such large interest speaks to how tired students are of numbing their emotions — both positive and negative — so they can focus on their work, the next step, the next accomplishment.”
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The Good Life, Redux

And while our right to pursue it is written into the Declaration of Independence, happiness as a state of mind is more tricky — perhaps easier to attain once we’ve live through our “accomplishments” phase and retired, at least from the work treadmill.

Yet today’s level of global happiness is appallingly low, according to the 2017 World Happiness Report. An astonishing 87% of people are not actively engaged in their jobs, and 24% are unhappy in their career overall, a Gallup poll finds. This may be part of the reason the United Nations created the first International Day of Happiness in 2013.

The Day of Happiness always takes place on March 20th, which is also spring equinox (in the Northern Hemisphere). Is it a coincidence that the U.N. chose the day when people celebrate the return of the light, looking forward to better weather and a better mood?

Are You Positive?

Since happiness isn’t solely, or even primarily, dependent on money (especially if a senior is savvy enough to plan well, and apply for a HECM when this makes sense) — or on being released from the pressure to perform — what else affects our frame of mind, and how can we shift our perception without waiting for an annual Day of Happiness prompt?

When centenarians recount their lives, what’s compelling is the joie de vivre with which they express what they’ve learned, even through the most difficult losses. By being resilient, giving back, and “enlightening up”, they master what happens and move on.

One of my all-time favorite pieces of wisdom for being creatively positive (and positively creative) comes from 101-year-old Cliff Crozier, who bakes his own bread and cakes from scratch. He says, “I don’t have many failures. If I’m making a cake and it fails, it becomes a pudding.”

That’s a stunning example of the art of practical positivity. And it shows that happiness is not happenstance.

Bright Side Benefits

Looking on the bright side can keep us brighter longer — and healthier as well. Negativity negatively impacts our health, and can lead to heart disease, according to recent research from Stanford University on the effects of chronic complaining. It makes sense: if the heart is the seat of life and love, constantly hardening our heart through negative thinking and expression will cause hardening of the arteries.

As we’ve explored many times, there are myriad ways to reframe growing older, tackle ageism, and put a positive spin on our chronologically gifted years. The sooner we start, whether as LOs, HECM prospects, or high school students, the more time we’ll have to burnish our power of positivity skills.

One seasoned HECM originator describes how he put positivity into practice on a recent vacation: “We took a trip to Boston, hoping for good weather. Didn’t happen; lots of rain. So we just changed the plan and took subways and went to indoor sights. Also bought rain gear so we could do some of the outdoor things. Had we looked at all this negatively and groused over it, we would have had a miserable time.

“Viewing life’s circumstances in a positive light just makes for a happier way of living. Laughter and smiles are good for your health and also make you someone people like to be around. Optimism adds joy to our lives, and it goes hand in hand with less unnecessary worry and stress.”

Here’s a hilarious example, from a 91-year-old woman, of how her son “ruined her life” by teaching her a gratitude practice that helped rewire her brain from negativity to happiness...

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True Stories from the Field

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Are your referral sources missing the boat?

A traditional mortgage broker called her saying “there’s just not enough money in the new reverse mortgage so I told her we can’t help”. Are your referral sources closing the doors to a potential client unnecessarily? Where do you begin? (There is no transcript for this episode)

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