By Matt Allen
The information provided in this article is intended to give a general overview of the topic and is not intended as legal advice. For information specific to your situation, please talk with your reverse loan mortgage professional.
Article #10, Fried Eggs and Reverse Mortgages
To say that the reverse mortgage is misunderstood is a massive understatement. The American College of Financial Services polled 1,000 people between the ages of 55 and 75 with at least $100,000 in invest-able assets and $100,000 in home equity. Survey respondents were asked 10 questions on how a reverse mortgage works, only 30 percent of the participants earned a passing grade on the basic knowledge about reverse mortgages, while 10 percent of respondents gave incorrect answers to every question on the topic.
Assuming that poll is a good cross section of senior homeowners across America, 7 out of 10 people do not even understand the basics of a reverse mortgage and how they work. This would explain why the penetration rate of reverse mortgages is only 3.65% nationwide. Out of all eligible borrowers, only 3.65% have an active reverse mortgage.
I chalk it up to human nature. We can be stubborn and cling to our beliefs. Our caveman brain makes us fearful of the unknown. And to top it all off, we have terrific coping skills when dealing with tough situations.
If you are a parent you will understand this. The other night my wife was out of town and I decided to cook breakfast for dinner for my 4 and 7 year old girls. I made waffles and fried eggs. When I put their plates in front of them, they lost their minds. How dare I serve them anything other than scrambled eggs? I explained to them that it was just an egg but cooked differently. Not only that, but it tasted better than scrambled eggs. They could even dip pieces of their waffle into the yolk. With a little begging I finally got them to try it. They each hesitantly tried the eggs. After a little bit they both smiled and said the eggs were yummy.
They could have refused to try them, but they would have missed out on how delicious fried eggs truly are. They would have missed out on trying something new. Now they are big fans of fried eggs and ask for their eggs to be fried, instead of scrambled.
So what do fried eggs and reverse mortgages have to do with each other? Not much really, but bear with me.
Most of the time people come into my office reluctantly; usually do to some sort of financial pain they are experiencing. They have exhausted every other avenue and are only seeing me because they view the reverse mortgage as their last resort.
It is pretty obvious when they sit down in front of me that they are skeptical about the reverse mortgage. They are closed off, look uncomfortable and seem nervous.
Our conversations usually start out with me asking them what they know about reverse mortgages. Typically it is not much. And more often than not, the things they tell me are all wrong.
After I explain how it works, the protections that are in place, how it could be used in their situation and how it solves most or all of their problems, they usually say something like “It sounds too good to be true” or “why didn’t we do this sooner.”
The point is this, my girls could have missed out on something fantastic, something they now love, if they refused to let go of their misconceptions about fried eggs. The same is true for you. If you let misconceptions, myths and misunderstandings keep you from getting a reverse mortgage, you could be missing out on something that could improve your life substantially.