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The Healthy Wealth Experience - Where Financial Success Meets Personal Wellbeing
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There's $13,000,000,000,000 that's trillion with a T, in equity in seniors homes. Yet we have seniors that aren't keeping up their home, aren't buying their medications, not going and seeing their grandkids a couple of times a year. Because they were raised at a time where you didn't use your home equity to live off of. So reverse mortgages are for people that have substantial equity in their home.
Chris Hall:Hello, this is Chris Hall, and welcome to the Healthy Wealth podcast where we talk about health and wealth and how we can get better at both because you are not truly wealthy unless you are also healthy. Today on the podcast, I've got a very interesting guest, a good friend of mine, Rich Pinnell, and he's going to talk today about reverse mortgages. If you think you know about reverse mortgages, please listen. If you don't know about reverse mortgages, please listen. There's a lot of misconceptions and misinformation out there with regards to these, and I always find it very fascinating to find more out about how they work and who it's right for.
Chris Hall:So without further ado, thank you for being here, Rich. And would you tell us a little bit about yourself, please?
Rich Pinnell:Hi, Chris. I'm not a native to Redding, but we've been here since 'eighty two. Moved up here out of the Bay Area like so many other people. One of the funny things that you always hear when you move to Redding is, did your car break down going over the mountain during the summer? Gets it to be 100 We and ten, one and fifteen up actually came up here because we love the heat.
Rich Pinnell:Had a couple of boys when we moved up here, couple of teenagers. They finished school here and they are both here, which is a wonderful quirk that doesn't always happen when you move to a small town from someplace like San Jose. So both boys are here. They found their spouses and they raised grandkids. So we have four grandkids in the area and there's still looks like they're going to stay here for a while.
Rich Pinnell:My family and I have been involved with the youth soccer community for the whole time we were here. Actually, before we came up here, my boys were playing soccer in San Jose and came up here and got involved in the soccer community and have been blessed with that association. I always like to say, I think the world's okay. If you look at athletes running around, you can understand how the world will be okay down the road because they're disciplined and they're not bad people and they do their jobs and they get good grades in school and they work hard. So we've been blessed with being up here.
Rich Pinnell:We now just in the last year and a half have three great grandchildren, sitting in town here. So we get to start the cycle all over again. I'd to say that we were able to have the blessing of putting our kids in therapy. And now we put our grandkids in therapy and now we'll able to have a shot at putting our great grandkids in therapy too.
Chris Hall:That's pretty cool.
Rich Pinnell:Love the town, love being involved in the town. Been involved with the chamber here locally, the soccer league, the soccer park. I was on the board when the soccer park got built. And so that's pretty much my thing. My wife and I have been married for coming up on sixty one years here in October.
Chris Hall:Oh, man. Good for you guys.
Rich Pinnell:Yeah, she is an angel. She puts up with so much for me, like the time I came home and said, Hey, let's move to Reading. And she said, okay, I guess.
Chris Hall:Yeah, like, let's do it, right? That's crazy. I love that. Don't forget about your job as the treasurer for the Reading Sundock Kiwanis. So
Rich Pinnell:Yeah, we founded that club, oh, like two and a half years ago, I guess. And somebody said we need a treasurer and everybody else stepped back and I was standing there. And I had some involvement with youth sports the board area and there was something about nonprofit financial things. So I've been doing the treasury gig for a couple of years now. Seemed to catch all the money going through, getting it in the bank, and things seemed to work out.
Rich Pinnell:So the group has done very well, exceptionally well actually, because small clubs getting started in the community usually have a difficult time funding their projects. And because of your half K that started a long time ago and brought it over to our Kiwanis Club, we're a success story in terms of raising money and doing the things that we want to do, and that is help kids in the community. Our club is dedicated to feeding the kids in our community that maybe don't have the best food security in the world.
Chris Hall:So That's right.
Rich Pinnell:Been a blessing to be involved in that. Thank you for
Chris Hall:your work on that. That's really been important to this community. And for those of you guys don't know, Ready to Sun Dog Kiwanis feeds roughly three fifty kids a week right now in the Enterprise School District. We have what's called a granite grab and go pantry. The kids can come in there and get food anytime they want.
Chris Hall:Our goal is to make sure that every school has one of these grab and go pantries and that every school, every kid in every school can get food whenever they want it. So we feel like we're serving the community right now with three fifty people, but we also feel very confident that there's probably another thousand kids out there that still have food insecurity just in our town. You know, one of my tenants when it comes to this stuff is we're not out of resources, like we have plenty of food, where we're out of is love. And so there's many, many things that, you know, we love in our lives, but we have a really good group of people that loves to feed kids and make sure that they're okay. And this community supported that club, and we do really well, and we'd like to do even better.
Chris Hall:So if you would like to become a member of Kiwanis or figure out a way how you could support Kiwanis, please don't hesitate to reach out to me or Rich and we'd be happy to let you know what's going on. So thank you Rich for that.
Rich Pinnell:Yeah, actually meet the first and Wednesday, first and third Wednesday of each month at the Old Market Street Steakhouse, which is now Blade and Barrel, I believe. Yeah, Market
Chris Hall:Street Blade and Barrel. Yep, that's right. So, okay. So let's get on to the matter of hand at hand, which is tell me about a reverse mortgage and how does it work?
Rich Pinnell:Sure. More than happy to. I've been doing reverse mortgages now for a little over ten years here. I actually got in the mortgage business in 2014 and my very first mortgage was a reverse for purchase in Southern California. And that lit my brain up to what reverse mortgages can do for people.
Rich Pinnell:I've been doing them ever since. In 2017, I started doing them full time. So that's all I do now is reverse mortgages. And I'm one of the of about two fifty CRMPs, which is a national designation of reverse mortgage professionals in The United States, which is a more background checking on us and much more continuing education and those kinds of things. So I love it.
Rich Pinnell:I think it does a great job for a certain segment of our population that's our seniors. We know and the numbers are staggering. There's $13,000,000,000,000 that's trillion with a t, in equity in seniors homes. Yet we have seniors that aren't keeping up their home, aren't buying their medications, not going and seeing their grandkids a couple times a year. Because they were raised at a time where you didn't use your home equity to live off of.
Rich Pinnell:So reverse mortgages are for people that have substantial equity in their home. We can do them as low as 55 years old, but government backed reverse mortgages, which is called a HECM, H E C M, which is Home Equity Conversion Mortgage. The government backed one of you have to be 62 years old. And then we build a program around what your needs are if you have substantial equity in your home. You know, we heard the horror stories.
Rich Pinnell:Everybody's heard the horror stories about reverse mortgages.
Chris Hall:So let me stop you for just a second. So explain to people what a reverse mortgage is. Like, let's just go with the very basic, like let's say you've never heard of it before. Sure. And someone walks up and goes, I don't know what a reverse mortgage is.
Chris Hall:Tell me what that is.
Rich Pinnell:It's a way of using part of the equity in your home to support your lifestyle today as you go through retirement. It's as simple as that. It's like a forward mortgage, except it never requires a payment.
Chris Hall:Okay. That's actually, I really wanted to hear that. So basically when I talk to people about reverse mortgages, you know, I say like your mortgage is your mortgage, and as you pay them, make payments on it, it goes down, it goes down, it goes down. In this instance, you get your mortgage as your mortgage, but you don't pay payments ever again. And then they just sort of like add that interest that you owe onto the balance of the loan.
Chris Hall:Is that the best way to understand it?
Rich Pinnell:Yeah, that's the best way to describe it. You are incurring the same interest if it was a regular loan, a regular forward loan. You just aren't making payments on it. So the balance goes up. Right.
Rich Pinnell:And over the last couple of years, when we had the 2.5 interest rate refi boom back in 'twenty one, I see now people come in all the time that refi ed their home. They're 70 years old and they took a thirty year mortgage when they're only ten years away from having that mortgage paid.
Chris Hall:Right.
Rich Pinnell:And that's crazy. So now they know that they're never going to pay off their home. So that kind of thing goes away. Now we just need to convince people that there's no downside to a reverse mortgage. It's just a way of using your equity today to support a lifestyle however you want that lifestyle to be.
Chris Hall:Right. I think one of the things I've noticed in my practice is that, you know, people, some people are very good savers, obviously. Some people are not super good savers, obviously. But what I noticed was that especially this generation that's retiring right now, we're kind of getting the tail end of the boomers right now. But basically they were taught like pay off your house, have a paid for home.
Chris Hall:And then I also feel like the government did a disservice with those folks kind of making, not necessarily promising, but inferring that social security was gonna be their retirement plan. And so I find this whole group of people who have a paid for home or a home with and yet no other retirement assets, no four zero one ks, no IRA, no money in a brokerage account, no second pieces of property. And that's it. And then they get to social security age And they're noticing like, hey, I'm getting $1,700 a month. It's like, that's not that much money in Redding, California.
Chris Hall:It's not that much money anywhere in The United States. Sounds pretty good if you're in Mexico. But, if you're in California specifically, that's not very much money. That's where I feel like you see the real, like that's the question where you go, okay, you have to pay attention to this. This is an option for you to, and I love that they call it a HECM, you know, the home equity conversion mortgage, because that's what we are doing is we're taking that equity and we're converting it to something that's usable, because you can have $500,000 equity in your home, but you still can't buy a piece of bread.
Chris Hall:So it's pretty useful in my world, I think, as well. What do
Rich Pinnell:you think the biggest benefit
Chris Hall:of reverse mortgages? What's that?
Rich Pinnell:There's a couple of things that happened with the whole idea of retirement, my generation. First of all, there was a lot of defined pension programs still floating around when we were growing up, and we just kind of assumed that we would have some kind of a defined pension program, too. Not true, of course. But the other thing, the real crazy part was our parents retired at 65 and died before 75. And that's not the case anymore.
Rich Pinnell:Most of us, if we get past 70 without major health problems, there's a good chance we're going to be into our 90s. So even if we were good savers, did we ever think that we would need that much money to get out of here? And it's just it's a crazy situation. And yet I see people sitting on 100% equity in their home and struggling to, I don't know, put tires on the car. They put tires on the car with a credit card and then they pay 20% interest on that money that they really didn't have in the first place.
Rich Pinnell:So the HECM makes a big difference in people's lives. And it's a non recourse loan, which means there's no downside to the back end of this deal. When we're gone, that HECM will be taken care of either by the family, the estate, and they can make money off of it. They'd still own the property. So if the home is still in a profitable position to sell, the family gets to take that equity out of the home.
Rich Pinnell:Doesn't go to the bank. And I've heard that story time and time again. And the beauty of it is if it's upside down, if we have it another twenty ten, people talk about this all the time, well, what's going to happen to my family if they have to pay off a shortage in my home loan, my HECM? And the beauty of it is it's a non recourse loan. Government takes that loss and your estate can literally mail the keys back to the lender if it's in that kind of a situation.
Chris Hall:Yeah. And avoid probate. Yeah.
Rich Pinnell:There's a whole bunch of stuff that's just there. All the backside is just when people hear about it, go, Oh boy, that just took took all the all the risk away from this process.
Chris Hall:Right. Right. How, what are the main advantages? Like, what would you say the main advantage is of a reverse mortgage at this point?
Rich Pinnell:Cash flow. Because you can take the money out of a reverse mortgage a couple of ways. So first of all, we have to pay off an existing loan on there. So if family member, a family is paying a $1,500 a month house payment and we do a reverse form, that $1,500 goes directly back into their cash flow. And as you well know, that's actually a double plus because they get rid of the payment, but they also get that $1,500 now that they can use for other things.
Rich Pinnell:And then if there's enough equity in the home, we can set up a line of credit and they can draw on that line of credit whenever they want. And that takes if somebody has to go in the hospital. You know, Medicare is the greatest insurance out there as far as I'm concerned. But when you go in the hospital, you're still going to have a 20% copay. And can you handle a thousand dollars, or do you have a shot that you have to have on a regular basis, that costs 400 or $500 You can use the line of credit for that.
Rich Pinnell:You can use the line of credit for fixing things in your home. You need to fix to stay in the home, like maybe handrails in the bathrooms or a walk in shower, tub arrangement, those kinds of things. So the money can be used for anything because it is your money. The other big thing that you'll recognize as a plus is it's non taxable. It doesn't create an income stream that you now have to pay taxes on because it's your own equity.
Rich Pinnell:And that's a huge plus.
Chris Hall:Huge, especially if you've got a couple different buckets, you know, you've got your IRA money and you've got maybe your Roth money and then you've got this money, you can start pulling money out to do certain things with different buckets and different taxes coming out of them. So it's nice to have another bucket that's non taxable. Yep. Then do you say to people
Rich Pinnell:go ahead. I was going to mention for people just going into retirement, there's a thing called sequence of risk returns. It has to do with the first five years that you're in retirement and you're drawing money out of a stock portfolio of some kind. The beauty of having a reverse mortgage in that cycle is if the stock market or wherever your investments are take a dump or don't have a good year and you're still trying to pull four or 5% out of that stream, that really affects principal because you didn't have a return. Now you're taking principal out of those funds that won't be there when the stock market comes back.
Rich Pinnell:So you can use the reverse mortgage as a bridge when we have those bad years. And that first couple of years, if you get hit with a couple of bad years of returns, it could drastically affect where your portfolio is at the end of that cycle.
Chris Hall:Yeah, no, I've seen that data before where, you know, on a bad year, you take it out of the reverse mortgage, on a good year, you take it out of your portfolio. And it was like both of those seem to like stretch way further when they're kind of used in conjunction. Definitely seen that. Now for those of you guys that don't have equity in your home, but typically just just kind of FYI, I will usually put together like a war chest of, money set aside so that if we do have a bad market for three or four years that we don't have to, like, take that money out of your investments, we can have it in the war chest, which also kind of glorifies savings account. But we're going to get better interest rate on that you're going to get the bank.
Chris Hall:But yeah, that's for those folks that have equity, it's a great way to glide through those tough times when they come up. What do you say to people who say, don't want to do a reverse mortgage because I don't want to lose my house? So I know that's an old theology, if you will, but please explain that because I'm sure you get that question to you probably every week.
Rich Pinnell:Yeah, every time, always in the first conversations with clients, we get that. You know, I've heard that you can lose your house, that the bank will take your house away. And that's absolutely not a true statement. The only way that you can lose your house if you have a reverse mortgage is if you don't pay your property taxes, if you don't pay your homeowner's insurance, or if you let the house fall into such disrepair that the county or city red tags it for you. Those are the only ways that they can foreclose on your home.
Rich Pinnell:Otherwise, you can live there. When we do the deeds of trust on the homes, they add, so normally we have a thirty year term on a loan, right? Well, when we do a reverse mortgage, they take it out to as if the client was going to be 150 years old. So they can't call the note until thousand ninety, something like that. That's literally in the paperwork.
Rich Pinnell:And so it just takes the whole pressure off of the client worried about, okay, well, I already pay my property taxes. I already pay my homeowner's insurance. So we're fine. And in fact, I have lots of clients who are using their reverse mortgage line of credits to pay the California Fair Plan homeowner's insurance because it went from $1,000 or $1,200 a year to 5,000 or $6,000 year. And they wouldn't be able to stay in the home because they don't have enough income to support a $708,100 dollars a month homeowner's policy.
Chris Hall:Yeah. So speaking of that, one of the things that kind of drives me crazy as a financial advisor is, you know, people will come in and they're getting retired, so they're gonna move their four zero one k into an IRA so they can have more management over it. They're just, you know, disconnecting from their company. So it's a pretty logical step for most people. And then the first thing they wanna do is, like, pull a $100 out to remodel the kitchen.
Chris Hall:And I just think, like, oh, I just I love I I I love to show people what that does to their retirement strategy, like pulling that money out. And so to give people like a a home equity line that they don't have to pay back seems like a more logical step because typically speaking, you know, they'll say like, oh, we're remodeling the kitchen so we can sell it. Well, you're probably not gonna sell it. You're you're so you're really remodeling the kitchen because you wanna remodel the kitchen, and I got no problem with that. You wanna remodel your kitchen.
Chris Hall:That's great. But taking it from the house, borrowing it from the house to put it into the house seems like way more reasonable than taking it from your, know, taking it like a fifth of your overall retirement plan. Again, for a kitchen that, you know, is not going to add probably more than a couple bucks to your overall equity.
Rich Pinnell:And correct me if I'm wrong, but if they take that money out of their IRA or whatever, they're probably gonna create an income taxable event out of that too.
Chris Hall:Definitely a taxable event, absolutely. Yeah.
Rich Pinnell:That's not the case with reverse mortgage, that never touches your tax return. Right.
Chris Hall:Right. So I know that rates are an issue right now for everybody. How has that affected the reverse mortgage side of things?
Rich Pinnell:You can look at a reverse mortgage interest rate and track it over the years. It basically is FHA interest rate is what it comes down to. So right now they're in the mid to high sixes. We actually had a pretty good adjustment today on ten year bond. US bond came down 30 points today, which is just a factor.
Rich Pinnell:But it means that, yes, yes, it means that for reverse mortgages, because we use the ten year bond to set our reverse mortgage rates, that gives the buying power a much bigger chunk of buying power to the client. As interest rates come down, we can actually loan more money. It's really strange. The HECMs have three components of how we get to loan money. And it's an FHA formula, all the companies that do reverse mortgages do it the same way.
Rich Pinnell:We get to loan based on the youngest person in the house's age, the current interest rates, and the value of the home based on an appraisal. So the older you are, the more money we can loan. The lower the interest rate, the more money we can loan. And then the appraisal is just what it is, it's an appraisal. As So those rates come down, literally, we can go from a deal that didn't work six months ago to a deal that works today because we we got that extra bump of interest rate.
Rich Pinnell:Okay.
Chris Hall:So I I think that's really good for people to understand is because I know that I, in my mind even thought that, you know, whatever interest rates are now maybe add a point or two. So you're actually saying it's like pretty much in line with if you were to go borrow the money any other way, correct?
Rich Pinnell:Yes. FHA is one of the lower interest rates in the home mortgage field and we track with that rate. It's actually lower than a conventional loan.
Chris Hall:That's great. I love That's really cool because again, I think that's what people are most worried about now. That brings up the question, right? So if someone gets a reverse mortgage from you today and two years from now they want to do a new reverse mortgage because rates got down into the four somewhere, how hard is that?
Rich Pinnell:We do it all the time. We don't do it very often because it hardly ever works to that advantage. I remember back when we were back down to, you know, 2021, we were at and a half on going interest rates. For the first time in the ten, twelve years I've been in the business, the reverse side of the business, I did four or five refis that year because the numbers worked for the client. And we have to do something when we do a refi on a reverse, it has to be beneficial to the client first and foremost.
Rich Pinnell:We actually have a formula that has to benefit them on cash flow and interest rate and a bunch of other factors before we can even consider it.
Chris Hall:Right. Now you mentioned that you could be, you know, I know that from my in my perspective, it was like you could be 62 and over to get one. You had mentioned 55 and over. What is the what is the really the requirements, of becoming like, how do you become someone who's eligible for reverse mortgage?
Rich Pinnell:Yeah, literally living long enough. So the 55 year old is proprietary reverse mortgages. There's FHA, which is the HECM, and then there are proprietary. The proprietary products go all the way up to $4,000,000 where the HECM is capped at about $1,200,000 of value. So we have a jumbo side of the reverse mortgage business.
Rich Pinnell:And on the jumbo side, we can do 55. And it just affects the amount of money we can loan. So it reduces the amount of money we can loan because the lender is going to have that loan for that much longer.
Chris Hall:So like 55 and over would be like more of a primary like market type of thing where people are kind of like putting package deals together and then like 62 and over be more government sponsored programs. Is that am I hearing that correctly?
Rich Pinnell:I don't think that's quite right. It's the proprietary reverse mortgages were designed for the more high value homes and for the younger age groups. And there's hardly any reason to do a proprietary other than age. If six, more than 62, the heck of them works better for you. Up to the 1.2, they just loan more money.
Rich Pinnell:We get on the proprietary side, the lower age, the more value, they have a little more risk about market value down the road. So it's a different product. It tracks the HECM, but it's really a different product for a different reason, that is higher value homes. Now we don't get into very many of those up here, because pretty much everything in this marketplace is 1.2 or lower and or people that buy $4,000,000 homes usually are at 62 years old.
Chris Hall:What is, now with our area, you had mentioned, you know, that we're not 1,200,000 with our area. What is what is a good number? I think I I think I talked to Josh Barker in my last podcast, and he was talking about the average home is still right around $400,000. So let's say someone has a $400,000 home and they have all equity, they've paid it off. Like what can they expect dollar wise to get out of that reverse mortgage?
Chris Hall:How much can they loan against it?
Rich Pinnell:So if you're 62 years old, you're probably going to get about 45% of that value. If you're 80 years old, you're going to get something north of 65%. Yeah. The older you are the
Chris Hall:more
Rich Pinnell:Kind
Chris Hall:of like an actuary table.
Rich Pinnell:Yeah, exactly. And the lender, the reason it's done that way is the lender knows that they're going have the loan short, a shorter period of time before they're going to get their payment. The people that buy these loans, that buy the mortgage backed securities in the reverse field, I've been told that it's primarily insurance companies that have to have life insurance companies. So they take a premium from a 25 year old today, and the government requires them to have that in a hard asset. They can't put it the stock market.
Rich Pinnell:So they go out and buy things that are going to pay off in twenty or thirty years. And they're not going to worry about that loan getting paid off early because everybody knows that most people stay in their houses or keep their loans for about seven years. With a reverse mortgage, people usually keep it until they're no longer in the home.
Chris Hall:Right, right, okay. Why do you think that reverse mortgages are so misunderstood?
Rich Pinnell:A lot of bad press early on and a lot of bad actors really in the business early on. One of the few good things that came out of Dodd Frank was they tightened up this area completely. Back in the day, pick a year 'five, if I was a reverse mortgage lender, loan officer, I could also sell annuities. So people would take a reverse, the loan officer would then take the money that they got out of the reverse mortgage and convince them to buy an annuity, which may or may not have been the best deal for the client, but the LO got two commissions out of the deal. They tightened all that stuff up.
Rich Pinnell:They tightened up. The other thing that was a problem was they didn't have any financial assessment. If you were breathing, you could get a reverse mortgage. 2014, they started doing financial assessment, which just simply meant the client had to be able to prove that they had enough continuing income to pay property taxes, to pay insurance, to pay homeowners expenses, and some money to live off of. And that really took people that didn't belong, that shouldn't have been staying in their homes.
Rich Pinnell:It put them not able to complete a reverse mortgage, so it really worked out better for everybody around. I talk to people on a regular basis that for one reason or another really shouldn't take a reverse mortgage. Maybe they have a two story house and they're both using walkers, that kind of thing. Or maybe they had five acres and they couldn't even walk the acreage. Or I had a client a few years ago, lived out in Gold Hills, and they loved their home.
Rich Pinnell:Huge backyard, beautiful landscaping, the whole shoot and match, they entertained a lot. They'd gotten to the point where they couldn't take care of that landscaping anymore. They were paying a thousand dollars a month to have their landscape taken care of by a professional, and it was just not sustainable. They sold the house for $700,000 came into town, bought a house for a $500,000 house, but they bought it for $250,000 and they now have a yard that they can manage. Right.
Rich Pinnell:In that case could
Chris Hall:you do
Rich Pinnell:We can do reverse purchases if somebody wants to. We call it right sizing. So we can do a purchase with a reverse mortgage also.
Chris Hall:Right. So for those that don't understand what that means is like you can literally buy a house like through reverse mortgage and you're going to have to come up with some money because again, you want those equity measures you had referred to earlier. So, like, if they're like you said, if they're 62, they're gonna wanna have 55% of the down. Yes. But so they're gonna need that.
Chris Hall:But then once the rest of the mortgage is in place, then they never they still don't have a mortgage payment. That's what reverse mortgage purchase is, correct?
Rich Pinnell:Yeah, that's exactly right. You hit it on the nail, Ed. And it allows the realtor to take a client that they just sold their home and the people have a bunch of cash that they put in the bank. And they say, okay, we have $500,000 in the bank,
Chris Hall:we want to have- In the bank.
Rich Pinnell:So we want to, yeah, exactly. That's the first problem. We want to have a cushion left over after we get done buying this house. And most of us know that if a realtor shows us a house that's half of what we just sold, we're probably not going to want to move into that house. It's too different.
Rich Pinnell:I tell the realtors when I talk to them, I say, it's simple. Show them a $500,000 house and they can buy it for $300,000
Chris Hall:Right.
Rich Pinnell:That's That's really the trade off. And then they get everything that they want out of the deal. House payment cushion with you, properly invested.
Chris Hall:Yeah.
Rich Pinnell:And not very many worries at that point.
Chris Hall:Yeah, no I like that a lot. That's very good. So can everybody do reverse mortgages or do have to be specifically trained or how does that work?
Rich Pinnell:Personal peeve of mine. Any loan officer in The United States that's properly licensed can do a reverse mortgage. I'm with Guild because they bought a company a few years ago that was just strictly reverse mortgage. And Guild has a pretty strong pro form a, if you will, that you have to qualify before you can do reverse mortgages. It's special handling for the clients.
Rich Pinnell:They don't do the things like computers, like they don't upload documents that you ask for by scanning and sending them to you. It's going to be a long sales cycle. I've had sales cycles that lasted three years because they couldn't make up their mind if they really wanted to do one or not. That doesn't work well with forward mortgage people that are used to closing loans in fifteen to thirty days. So there's that part of And then it just takes more care.
Rich Pinnell:You're going to have more handholding with these people. I visit with every one of my clients before we do a reverse mortgage. I want to see what kind of house they're living in. I want to see if they've got carpet pulled up in the entryway where they night trip on it. Are they really taking care of their home?
Rich Pinnell:Are they where they need to be? I just want to make sure that they're comfortable and we're going do the right thing for them. You know, two story home, that kind of thing. I want to know, I want to have those conversations before we actually go into it.
Chris Hall:One of the things I liked about referring to you, is because, I have told people this and I truly believe it. Like if this isn't good for you, Rich will tell you it's not good for you. So to me, that's a real nice opening the door for people to walk away and be like, I don't like this, this isn't working for me. You know, they don't feel like they're gonna get a pitch on it. So, that to me is nice.
Chris Hall:It's a nice way to move people to a concept that again, has a lot of negative connotations to it, which again are deserved, but they're old, right? So like Dodd Frank was, was it 2014 you said?
Rich Pinnell:2009 was when Dodd Frank was put
Chris Hall:Oh, right after the crisis, right? Yeah. Right after the great recession.
Rich Pinnell:Makes sense. Tightened up a lot of things, Made this business, the mortgage business, a lot tougher than it used to be. But it was still good for the industry. Needed to have some housekeeping done. When I sit with my clients, the clients usually come to me or I go to them in the first call.
Rich Pinnell:I'll sit with them for an hour, hour and a half, whatever questions they have. I'll be there until they're done asking. And I hardly ever, unless they give me really signs that they want to move forward, I hardly ever ask them, Are you ready to go? Do you want me to start this process? I let them ask that question.
Rich Pinnell:How do we move forward in this thing? What do I do first if I want to do it? Cause I the first visit with them is about education. They can't make a good decision until I give them everything I know about what they're doing.
Chris Hall:Well, and by law, do you have to, they have to be in an education class of some type, correct? They can't just go into it without having some formal education that's been put down by the government?
Rich Pinnell:Yes. FHA requires that every reverse mortgage, client before we can initiate the application, takes a hour long, and it's not, you don't have to go someplace, you don't have to do it online, it's on the phone. You take an hour long class by a third party vendor, not affiliated with us, not affiliated with FHA. And people say, well how hard is it to pass? Well I've never had anyone fail the class.
Rich Pinnell:But they want to know that you know how to live on a budget, that you have a handle on your finances, that kind of stuff. Used to think it was a waste of time. I've changed my opinion because it gives the client a different perspective, Not from me, not from what they've read online, not from Tom Selleck on television It gives them a different person talking to them about the reality of what they're doing I
Chris Hall:like they don't get to talk to Tom Selleck
Rich Pinnell:Yeah, I'm sorry, that 800 number never works. My wife's trying to
Chris Hall:That's a bummer. It's a bummer. So that's funny that you mentioned him because that's like, I think that's the number one connotation I think that people have is that there's something weird about it. And the second thing is it's like, oh, the thing that Tom sell, like always taxable.
Rich Pinnell:Yep. So they've spent
Chris Hall:a lot of money to get to that spot. You can't believe how much AE pays. Again, I personally refer to Rich and I have a handful of people I can choose from too. So a lot of times it's about best fit who I think relationship wise will be better. But like for me specifically with Rich is like he does this, right?
Chris Hall:And I know loan officers that when like in the last couple of years, times have gotten pretty tough for these guys because, you know, they're not closing loans like they used to be. And there's not that much out there, but the reverse mortgage people, they still exist. They still have to get to a point where like, Hey, can't afford my house anymore, but I don't want to move. So those are moving on. So I'm seeing a lot of people, Oh, hey, by the way, I also do reverse mortgages.
Chris Hall:And to me, that's the same as like when your accountant says, oh, I also do financial advice. Like, I'm like, okay, well, you can't serve two masters. Like, you're gonna be good at one and okay at the other. You're gonna be bad at both. I mean, you're not going be great at both.
Chris Hall:So, to me, I would rather someone see me for financial advice and I'd rather see someone see you for a reverse mortgage even though there are plenty of capable people out there who, you know, can do those kinds of things. I like people in my life, but I know it's going get done and get done right.
Rich Pinnell:I'm probably, the most thing I'm proud of in what I've done here is I probably have five local loan officers that work for different companies that refer their reverse mortgages to me, cause they know that I'll take care of their clients. And that's a real, that really pumps up my ego when I
Chris Hall:have one of those I really like that too. That's a really, that's huge because again, that's money that they're giving up to make sure that their clients are taking good care of. So I love that as well. Are there any drawbacks or risks to reverse mortgage? I think some people just need to have like that really awareness that like before I entered into this conversation, need to know XYZ.
Rich Pinnell:Well, think one of the misnomers about reverse mortgage, about the whole idea of using your equity is we were raised, like you said earlier, we're supposed to have our house paid off before we retire, so we wouldn't have that house payment. And that changed for my generation. We're living a lot longer. We're living a lot better. We have desires that we want to go on vacation all the time or take cruises when we're in our 70s and 80s.
Rich Pinnell:And that wasn't something that our parents even considered doing. By the time they were 70 they would be lucky if they could still walk. Right. And so I think that
Chris Hall:I mean you know like my grandpa, you know, I think that most people back then, life expectancy was like 67. So like you would literally retire at 65. And then two years later, you were dead. So like forget about saving money for retirement. You're just trying to like keep working until you die.
Chris Hall:Yeah. And then now it's like, you know, we've got social security, it's not meeting the needs of many, many people. That's not what his attention was, even though some people believe that that's what they were being told. And but everybody's been told since day one, pay off your house, pay off your house. So I that kind of equity.
Chris Hall:We've got people who are gonna live till they're 90, 95, 100, you know, and those are people who like you. Guess what? You can stay in your house until you're 100 and not pay a mortgage on it. Like to me, that's such a no brainer. I'm 53 and I'm like, oh, you can get a reverse mortgage of 55.
Chris Hall:Well, I might be strategically trying to do that. Now that actually brings up a question for me. I'm assuming you can't do a reverse mortgage on non owner occupied property. Correct. And I also assume that you cannot have more than one reverse mortgage out at a time.
Rich Pinnell:Both good points. And yes, that's true. Get to choose whichever house you want to have your reverse mortgage on. It has to be your primary residence. And you can have as many houses as you want, only one of them can have a reverse mortgage on it.
Chris Hall:That's what I was getting at, yeah.
Rich Pinnell:But that said, you can have a house and have four bedrooms in it and rent three of the bedrooms out to help your cash flow. Long as you're living in that home. That's just a way to, and I actually like that idea a lot if somebody's living by themselves because then they have someone else in the home that would be there if something happened. And I actually have a friend that is in that shape. He has a reverse mortgage.
Rich Pinnell:He rents rooms to traveling nurses. So it improves his cash flow and for me he's had he's fallen down a couple times. It's nice to know that I don't have to call him every day to make sure he's still upright.
Chris Hall:Nice to know that he's got a nurse literally right down the hallway from him. That's pretty cool. Yeah.
Rich Pinnell:Yep. That's absolutely true.
Chris Hall:That's a good idea. Yeah. And then we also have, you know, like where we live, Bethel Church is huge. A lot of kids go to Bethel School Ministry. So like, you know, those kids need rooms.
Chris Hall:That's a great place for them too. You know, they're gonna, you know, especially if they're like the quiet type, you know, they can go in and rent a room out from a guy and then also that person has somebody around them. I think there's some data that came out, if you're familiar with blue zones. Are you familiar with blue zones?
Rich Pinnell:No, I'm not.
Chris Hall:So blue zones are several areas in the world where people are living well into their 90s and sometimes into their 100s. And for the longest time, there's one in Italy, there there's several. For the longest time, they thought it was diet and exercise. And a lot of those places live on a kind of a Mediterranean diet instead of, like, an American Burger King diet. So that's one of the reasons they thought that was an issue.
Chris Hall:And then they kind of dug a little deeper. And I'm not saying it's been disproven that it's diet and exercise. But one of the things they talk about in all those blue zones, the older people have something to do. They have something to look forward to. They're like, they're in community still.
Chris Hall:And so they're saying that, like, what keeps people really going is being part of something. So I think that's, you know, to me, like, what you're saying is like, if you're at if home and you're by yourself and your kids aren't around, like what a great idea to rent a room out to somebody from the hospital or from somebody from Bethel, have a little bit of company, have a little bit of community, and a little bit extra income. So I love that. That's a great idea.
Rich Pinnell:And maybe the advantage of that too is have somebody argue with. I think a lot of us enjoy banter back and forth. And if you're by yourself, it just doesn't work the same way.
Chris Hall:Yeah.
Rich Pinnell:But I think I'd argue with you about, you know, you mentioned Italy, I'm pretty sure there has something to do with red wine. You
Chris Hall:know what, you're probably right. I know that, the polyphenols in red wine and dark chocolate are pretty well studied as being pretty pro health. You're probably onto something there. Don't think the red wine's necessarily the end all be all, but I think it probably does factor in for sure.
Rich Pinnell:I think, know, we've gotten away from a lot of stuff in the last couple of generations, one of which is moderation. I think everything we do in moderation helps us live better, live longer, and live happier.
Chris Hall:Sort
Rich Pinnell:of a personal mantra for me.
Chris Hall:So that's pretty much all I had today for questions and stuff. Is there anything that you want to talk about that we didn't touch on?
Rich Pinnell:I think the biggest thing that I would like to tell everybody that's ever considered the idea or one of the family members, if you ever want to know something about a reverse mortgage, if it's just idle curiosity, call a professional. FHA and Nirmala, which is a National Association of Reverse Mortgage Lenders, have a listing of all of our CRMPs in the country with contact numbers. Those are the people to call where we
Chris Hall:What's walk CRMP?
Rich Pinnell:Yeah, CRMP. Certified reverse mortgage professional. That's a national designation. Talk to one of us. We're all in the same kind of mode where we want to educate before we ask for business.
Rich Pinnell:And that's what we want to do. We want to talk to people about what reverse mortgages are and how it might affect your life.
Chris Hall:Yeah, I like that.
Rich Pinnell:Just one of the my favorite story of a reverse I did for a guy down in Roseville a couple years ago. He wanted a Tesla. And his kids said, Dad, you can't take the money out of your portfolio to buy a Tesla because if you pay $80,000 for a Tesla,
Chris Hall:you're gonna
Rich Pinnell:have to pay take $95,000 out because you're going to have income tax on that money. And so he contacted me so he could get a reverse mortgage going. He had a $600,000 house that he owned outright. So he took a reverse mortgage and he bought a Tesla with some of the money out of the line of credit.
Chris Hall:Right, right. I love that. That's great. Should have bought That's the stock okay. I made that same mistake.
Chris Hall:Bought the Tesla instead of the stock as well. So well, I do on Tesla's. I have I have owned Tesla stock, should say that. I am not recommending a stock. I am not recommending you buy a stock.
Chris Hall:I wanna make sure I'm really clear about that. We talked about a company that is traded on the market, and I did not talk about you buying it. Yes. Okay. With that being said, no, I think I think it's a fun story.
Chris Hall:And again, I think when you run into, you know, people, you one of their concerns is like they want something to leave behind for their kids. That if all they have is their house, they feel like, well, I don't wanna give it up because I wanna make sure that my kids get it. And I know that they can get it. They're gonna have to pay off the mortgage the same way they would any other mortgage. But I would feel like, you know, one of the things I discuss with my clients is like, hey, listen, but at what cost, right?
Chris Hall:So, in other words, do you really, I mean, if you're 70, do you really wanna suffer for the next twenty years? Kind of like not doing what you wanna do and staying home instead of going out and doing all these things because you wanna give them this house that they're probably gonna sell and just pull the money out of? I mean, if anything, pull some of the money out of the equity, you know, convert some of that to, like, livable expense. And then, know, that way you can have a quality of life to go with it, which I think, again, is the is the reason for this podcast is it's healthy wealth. It's not just wealth.
Chris Hall:Like, if you have a $800,000 house and you own it free and clear, you are wealthy. I mean, in standards of most Americans, you've got a lot of money. But if you can't access it and you're literally like working off of a 10 year old phone and driving a 30 year old car, you know, you truly wealthy, like at that point? And again, I'll be real specific. Some people definitely want to have, they want to have a 30 year old car and they want to have a seven year old phone and that's totally fine.
Rich Pinnell:So I'm not worried about that part at all. I've had several clients come to me and say, you know, we talked to our kids about helping us with our expenses, we didn't want to do that. They don't need to be sending us a thousand dollars a month so we make it. And that's why they started looking at a reverse mortgage. Right.
Rich Pinnell:So how do you transfer wealth? When you transfer wealth by taking it from your kids because you're sitting on $800,000 that you want to give them later on, that money that the kids are giving you is probably coming out of their retirement investments.
Chris Hall:Right. And secure it before we get anybody else. That's how I feel about retirement for people as well. Once you're secure and you feel good about where you're at, then start looking around and what else you can do for other people. Yep.
Chris Hall:So, all right. With that being said, thank you so much for being here. And I really appreciate your time. And I just think it's a great topic that people need to learn about. And so hopefully they can take away some good sound bites from this and we'll put this on internet.
Chris Hall:I will, if you send me a link, I will put in the description so people can find out how to find you if they wanna talk to you. So again, you just send me the link. I'll send I'll put it in my descriptions, and then anybody watching this podcast or listening can go in the description and they can find Rich. And of course, you can always find me as well. I'll put my link in there as well if you have any questions regarding retirement, living in retirement, preparing for retirement, etcetera.
Chris Hall:So Rich, thank you so much for your time. I really, really appreciate you being here. And for all the people out there listening, thank you for listening to this. Really cool quick thing. Went ahead and told it up.
Chris Hall:In the last ninety days, the content that I've created has generated over 323,000 views. So Wow. Pretty cool. Pretty cool. Thank you so much, Rich.
Chris Hall:Appreciate you. Have a great day.
Rich Pinnell:You too.