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Reverse Mortgage Essentials in Florida (Jason Interviews Josh Blum) - YouTube
Channel: Elder Needs Law, PLLC - Medicaid Planning Lawyers & Elder Law Attorneys
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There we go.
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Hey, everyone.
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Welcome back.
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Thank you for joining the show.
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Again, I'm Jason Neufeld with elder needs
law.
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And as a reminder, you know, I recognize that
I'm just an elder law attorney.
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And there are so many other professionals
related to what I do, but they just do different
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things.
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And so my goal is to present to you information
that I have tangentially is related to what
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I do, but to hear directly from the experts
themselves.
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So today, I'm thrilled to have Josh bilum.
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He is with mutual mortgage, he is a home equity
retirement specialist.
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So he's specializing in reverse mortgages.
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And Josh, welcome.
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Thank you for being here.
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Why don't you introduce yourself?
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Jason, thank you so much for having me.
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So like you said, I'm a home equity retirement
specialist.
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That's that's fancy words for saying I specialize
in the reverse mortgage.
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That is all that I do.
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So day in and day out.
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That's what I live, eat and breathe.
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My backgrounds, all financial planning, Jason,
as you well know, for the audience in the
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listeners and the viewers.
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I've been in the financial services industry
for over 16 years, almost that entire time
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spent specializing on retirement planning,
specifically retirement income planning, and
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in the last three plus years, focusing solely
on the reverse mortgage as a niche within
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that space.
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So like to say I have a lot of experience
and a great foundation working alongside financial
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planners and other professionals like eldercare
attorneys, to just make sure that everything
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that we're doing is aligned with the client's
goals and what's in their best interest.
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Yeah, at Target.
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You know, you and I are in a similar business
in the sense that we are interested in getting
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people access to resources that they normally
wouldn't have.
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So we can leave the highest possible quality
of life, I do that through Medicaid planning,
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I help protect people's assets, them qualify
for these benefits they normally wouldn't
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qualify for, to give them extra money, you're
doing the same thing.
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So let's talk about the reverse mortgage.
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I think there's a lot of misconceptions about
it out there.
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You know, we got I think Tom Selleck, on TV
telling us that he trusts it.
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And so maybe we should, too.
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Let's start with very, very basics.
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What is the difference between a reverse mortgage
and the regular type of mortgage that everyone
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is sort of more familiar with?
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Yeah, well, we'll start with the name reverse
mortgage came out as slang, it's really nine
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out of 10 of these Home Equity Conversion
mortgages, head comes.
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The reverse mortgage is slang.
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And it's appropriate because traditionally,
the reverse mortgage was a tool where if I
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have a lot of money in my house, if I have
a house that's paid off or close to paid off,
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I could draw money out of my house, I can
borrow money from my house, and pull money,
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as opposed to a traditional mortgage where
I'm putting money into a home.
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a reverse mortgage.
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Very simply put, though, truly is just a,
it's a way to access the money in your house,
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it's alone, like traditional loans, the primary
difference in the major benefit being Jason
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that if I draw money from my house, no matter
how I choose to do that, I do not have to
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make a monthly payment on that money.
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The the balance becomes due down the road,
once certain stipulations are met, or certain
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conditions are breached.
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So it operates very differently.
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And for retirees or people near retirement,
it certainly offers a great way to access
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what might be a substantial amount of their
wealth, without having to impact cash flow
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on a negative basis.
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So you don't have to make monthly payments.
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So I think that's why most people are using
it.
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Because with a traditional mortgage, you get
your mortgage and then you're paying the bank
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back every month principal plus interest with
the reverse mortgage, you're that you're getting
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that loan money, but you're you're enjoying
it, you're not paying any of that back until
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of course whether they pass away or whether
you want to sell the house and things like
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that that Is that about right?
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Exactly right.
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The only thing I'd add to that is you are
responsible for taxes and insurance.
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If you have Hoa homeowners association dues,
you're still responsible for those, its principal
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and interest that you're you're given the
choice to defer, if you so choose.
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So here's what I typically hear about reverse
mortgages is they're good for people who really
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kind of don't want their house after they
pass away.
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They don't want to pass it on.
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They're kind of comfortable with I'm just
going to enjoy the equity.
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When I pass.
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It's probably going back to the bank.
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Is that accurate?
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Is that true? that falls somewhere in the
middle.
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I'd say that's a really big myth and misunderstanding
around the reverse mortgage and I'll kind
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of compare it to like two jugs of water.
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to kind of keep it simple for a lot of people
they that if one jug of water is the money
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in my house and the other jug of water is
my money everywhere else.
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A lot of people will spend the jug of water
they'll they'll pour that jug out until it's
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empty and they'll keep the jug that's the
money in their house.
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But if you think about it, if if I'm pouring
from jugs or I am pouring from the jug, that's
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the value of my house, then there's definitely
validity to turn around and say, Well, I'm
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not pouring out of the other jug, or I'm not
pouring as much out of the other jug.
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So it's not that you're, you may not be passing
on the full value of the home, but you're
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probably passing on other assets and value
somewhere else, because it's all part of the
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greater wealth that somebody is dealing with.
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So it's just a question of which wealth Am
I passing on, if any of it because unfortunately,
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just since a lot of what we see is, people
don't have enough for a long retirement, your
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30 plus year retirement, a lot of us don't
have enough saved up for that, or we're not
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prepared for the financial shocks we see from
healthcare.
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And so it's really just a question of, are
we going to spend all of our money no matter
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what, and and if so, figuring out what the
best way to do that.
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So I think that's, that's a big myth, and
it just needs to the way people look at it
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shouldn't be in a vacuum, it should be part
of the bigger picture.
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So and this is maybe not a fair question.
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And you can answer kind of however you want,
you know, when does it make sense?
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What does it reverse more than make sense?
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Why does it not make sense?
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And maybe what alternatives do people are
people?
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Are you advising people to consider before
they are entering into a reverse mortgage
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relationship?
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So it's a great question.
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It's and it's totally fair, I there, it's
a tool, which means it's it's very appropriate
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in certain circumstances, and for certain
people and wildly inappropriate in other circumstances.
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And for other people.
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A good rule of thumb with the reverse mortgage,
from my perspective is it needs to be absolutely
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needs to be somebody who intends and plans
stay in the home.
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I talked with a lot of people and they say,
Well, I don't know, my, my intent is to stay
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in the home, but I might not okay, that that's
right, a lot of us don't know what the future
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is going to hold.
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But unless you have an active plan, not to
stay in the home, you know, our assumption
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is because this is what plays out experience
wise, most people will stay in their homes,
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if you have to want to stay in your home.
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Really it, it's in all likelihood going to
be a large percentage of your wealth.
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So if you think about, well, how much am I
worth, and how much of that's actually in
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the house, it's going to be a pretty big chunk
of it.
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And for the average person in this country,
that's the case, I think the statistics are
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somewhere around 68% of retirees wealth is
tied up in the home, right.
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So I, I need to age in place and want to age
in place.
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And a lot of my wealth is tied up in the house.
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And you could you could argue pretty soundly
that the wealth that somebody does have outside
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of the house, if it's heavily invested in
an IRA money, which is going to be treated
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as ordinary income, it could be really, really
worth taking a close look at the reverse mortgage
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for somebody that fits that picture.
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So that's kind of a very simple broad stroke
picture, Jason, but it applies to probably
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a lot more people.
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Right.
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And we ordinarily think about the reverse
mortgage for who it's inappropriate for to
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me is, is the very wealthy, who have other
instruments that many of us don't have access
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to that are probably better better to use.
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And, and truly people who are painted into
a corner or backed into a corner, it's not
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that it can't be used, it's just typically
the least effective there.
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It's much better as a tool to say, Hey, I
can see that I've got an issue coming up.
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How do I avoid being in that position?
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That that's where it's best used.
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And that's really where other options come
into play?
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Because the reverse mortgage Jason Yeah.
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To the point of the question, are there better
options for people out there?
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Well, it depends on your situation, it should
probably be considered a lot earlier than
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it is.
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And it should be considered alongside other
options.
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So I think for a traditional retiree, especially
in today's current interest rate environment,
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well, what kind of normal financing options
do I have?
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If I need to access money from my house?
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What a 30 year conventional mortgage makes
sense?
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What a traditional home equity line of credit
makes sense for me?
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And and a lot of instances, it very well may,
it doesn't mean you should preclude looking
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at the reverse mortgage, it should just be
something alongside that, and your due diligence
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is done, as opposed to, oh, let's only look
over here and ignore it completely until down
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the road, which is probably what people have
done the most in the past, but would be better
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served by not doing that.
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Yeah.
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And I'll tell you, to your credit, I've referred
a number of clients to you over the years,
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and I've had several who have come back Hey,
first of all, everyone loves working with
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you.
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You're very friendly and you explain things
very well and very patient and you really
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do explain to people, the full gamut of options
available to them.
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And I've had several clients that refer to
you saying Josh told us the reverse mortgage
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wasn't for us and that's always really impressed
me because that's what you do.
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And you you do absolutely have the clients
best interest at heart which is important
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to me, as you know, someone who's making In
a recommendation, so I want to thank you for
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that.
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And I know I have first hand experience with
my talk to my clients after they talk to you.
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And you, you do always do the honorable thing.
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So thank you for that.
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Another neat fact or fiction?
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You know, I think a common maybe it's a myth,
maybe it's true isn't here about the excessive
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fees associated with reverse mortgages?
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So maybe talk a little bit about that?
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How are the fees compared to other loan products?
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And you know, what do we have to say about
that?
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Yeah, it's a it's a very valid point, especially
here in the state of Florida.
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So if we were to look country wide, are there
fees that are unique to the FHA Home Equity
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Conversion Mortgage, but most people consider
the reverse mortgage?
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Yes, there are unique fees to that the state
of Florida in particular happens to, I think,
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have the highest fees in the country, by virtue
of how real estate and refinance transactions
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are treated in the state of Florida.
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I'll talk primarily Jason, I think about why
there's an extra unique fee to the reverse
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mortgage.
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And the reason is simple.
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There's a there's an incredible unique benefit
to the reverse mortgage that you don't have
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any other sort of financing you're going to
be looking at, which is optional monthly repayment.
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When we look at any other sort of financing
on the home, we have a payment due on a monthly
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basis, I mean, we are going to have to make
a payment.
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And that's over time how the lending institution
is going to make make money and make profit.
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very fair, pretty, pretty straightforward.
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With a reverse mortgage.
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The lending institution doesn't know when
they're going to to make their money, it could
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be in a year, it could be in 10 years, it
could be 30 years, it depends.
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And the lending institution doesn't necessarily
know how much they're going to make.
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There's there's some big question marks there.
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So the there's something called a non recourse
feature to the reverse mortgage, which is
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the feature that is that benefit, I don't
have to make a payment.
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The feature also protects it protects the
consumer.
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And it protects them by basically saying,
if I do a reverse mortgage, and I have a loan
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balance that's growing over time, because
I choose not to make payments, I'm still borrowing
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money.
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So there's still interest and I choose not
to make payments, my balance will grow.
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My balance and my liability, my liability
on that balance cannot exceed the value of
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the home essentially sale of the house to
make it simple satisfies my obligation as
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the homeowner.
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That's not to say my balance couldn't be higher
than the value of the house, just that I as
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a home owner would not be responsible for
that.
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Sure.
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Now, a lender might take issue with the fact
that, hey, I owe a lot more than this house
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is worth.
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And that's the non recourse feature.
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So everybody pays into an insurance fund.
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It's the same exact insurance fund that traditional
FHA mortgages for first time homebuyers is
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paid into same exact Mortgage Insurance Fund,
that Mortgage Insurance Fund protects not
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just the consumer, it protects the lender,
because if there is a balance that exceeds
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the value of the home, it's paid to the lender
through that Insurance Fund.
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There's a cost associated with that, because
we're not making monthly payments here.
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What the Federal Housing Administration decided
to do was they turn around and they said,
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Okay, well, we're just going to take 2% of
the home value, whatever it is 2%.
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And we're going to make that a fee that you're
paying into the insurance fund.
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So when you get to the closing table, if you
have a half million dollar home, that's a
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$10,000 fee.
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If it's a $400,000 home, it's still an $8,000
cost.
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That's real money, and it's what makes the
cost to reverse mortgages, so much greater
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than any other type of financing we see out
there today.
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Okay, very fair, straight question with a
straight answer.
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And we appreciate that Josh, and thank you
very much for being here.
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This is Josh Blom with neutral mortgage, we're
going to put his whatever information he wants
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us to provide his email address his website,
his phone number, we'll put that in the show
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notes for you guys and contact him directly
if you're interested in the reverse mortgage.
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Josh is a great guy.
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And like I said before, I referred a number
of my clients to him and all been very, very
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happy.
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So Josh, again, thank you for being here.
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Thank you for being a true professional and
pleasure working with you as always.
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Jason, thanks for having me.
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Nice chatting with you and appreciate your
time.
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Thank you
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