Tap Into Your Equity Without Refinancing, with David Rider

0:01 You know, I thought a lot I knew a lot about reverse mortgages. I originated a few back in the original version of them. I'm also broker. I feel like I'm pretty smart, keep up on the market. I launched this podcast almost 2 years ago and I've interviewed probably 75 of the top reverse mortgage originators in the country and I'm constantly amazed at the new options and possibilities and ways that you can use your equity. And today we're going to talk about specifically you have a great first mortgage, but you have a lot of equity. How can you tap into that? David Rider, who's with Nexsel Lending, he's a certified reverse mortgage professional to talk to us about how some multiple options you have and how to tap into that equity and keep, if you have happen to have, a great first mortgage. David, thank you for joining us again today.

0:46 Oh, it's my pleasure. Glad to be here, Bill. It's always a pleasure to talk with you. You're such a wise person and you bring on such great guests. Such good-looking and handsome guests like you, too, right?

0:56 You know, If the shoe fits. So, you know, oftentimes I think that people, and this is why I launched the podcast in the beginning, mistakenly think the reverse mortgage is just for that person is impoverished and they own a house free and clear and they're eating dog food and they qualify for the reverse mortgage. And that's great. And there are people who that's the case for and good for them. But really this is a much more sophisticated tool and I and I have clients who have huge amounts of untapped equity. They don't want to do a new first because they might have a 3% rate, you know, locked in for the next 20 years at 3% or whatever. But there are options for them to tap into equity and use some of these tools without refinancing the first. Talk about And there's more than one. There used to be one option and it was what it was. It's like a tool in a toolbox. If that screwdriver fits, great. If it doesn't, you're kind of screwdriver-less, well let me put it.

1:47 Talk about the options for accessing equity without having to redo the first mortgage when that's the right approach. Okay. First of all, let's separate the two. There's There are our traditional home equity lines of credit. We're all familiar with those. You go out and you apply for them. And those are great for people that are in their active income years. Typically it's a to do a pool or to do an addition and they're not meant to be there long term. There's a payment on them and those are fine. Those are great. But when you hit a certain age adding another payment on a fixed income becomes very hard. And so we run into a couple of problems. Problem number one. We have people that have equity but not enough equity. Not enough equity to retire their first mortgage and have a reverse mortgage, but they need repairs around the house. They need to Maybe they want to prepare the house for aging in place, something that you and I talked about quite a bit. So there's a reverse mortgage second. I'm going to talk about three of them today, but there's a reverse mortgage second that goes behind your traditional 3% first. And it's a lump sum payment. So you have all the money to do the travel or do the home repairs or do all the things that we know that you do.

3:06 And you have no second mortgage payment on it. And as long as you maintain the property as your primary residence and maintain your first mortgage just like you normally would have to you get this money. And it's not due and payable until the house sells and it's a non-recourse loan. So once again, if you end up in upside down, you're not ending up owing the lender.

3:29 Yeah, the non-recourse is at least in California and I think some in most states nationally when you buy your property if later the property is worth less than your purchase mortgage, that's called non-recourse on purchase money in most cases in California you can just mail the keys to the bank or typically they'll work a deal with you. They'll do a short sale, they'll do some sort of a solution to protect your credit history whatever, but they can't then say, "Oh, you know, we lost $50,000. You still owe that to us." That would be a recourse loan, more common on investment property, very common on commercial properties. And so, what you're saying is that this reverse mortgage second product is also non-recourse, which particularly for people who are elderly would be really important.

4:14 Oh, absolutely. And there's so many times that you could use it. You know, one of the things we talk about in retirement is the three stages of retirement, the go-go, some go, no-go. This is a perfect product for those people that know they can stay in their home, know they can afford that first, but want to live a little bit of life while they have some go-go left in them. It's a great way to tap that equity and not have to make that payment. So, it's a great product for them. It's a great product for again that person that wants to age in place and needs repairs. You know, my wife and I, we plan on aging in our home until the day we die. That's the goal. And so, this would be a product, let's say we wanted to put on a new roof in a second and fill in the pool and do some things necessary to make the house work for us long-term. Great product for that without tapping the first.

5:09 Yeah, and I think that more and more people, you know, I often see the term age in place like a pejorative, like these greedy senior citizens are keeping houses otherwise families could be buying. They were family when they bought it, but as one of those people now at 67, we live five blocks from our grandkids. Why would I want to move? I mean, am I going to find an adult, you know, facility as close to my house? And by the way, I have neighbors who in our case we're not so close to our neighbors, but we know who they are. We kind of keep an eye on each other. We know who's supposed to be coming and going and who's not supposed to be. So, the aging in place is really I think just a way of saying to live out your life in the home that you built for your family.

5:49 Well, the life that you built, absolutely. You know, that we're really not geared I know this number one concern of most seniors is not being they want to die in their home. They want to die with their family. They want to, you know, all those terrible things that we talk about, but the truth of the matter is just like you said, I know my neighbors. I know where my grocery stores are. My wife knows the grocery stores. She can get online, order her food. She knows who's All that fun stuff and you got to move, it's harder. Right. So, how do you stay in place?

6:19 Yeah, you know, I often think about you know, I fantasize about moving to Florida. I used to live there. My wife and I were married there and lower taxes and other issues. And I probably would do pretty well. I mean, you move to a new community. I'm pretty much outgoing, would meet people. But I guess my wife would be very uncomfortable. She has her friends. She had the same people for 30 years that she hangs out with and I can see that at least given the choice, you can make a choice. If you don't have the choice, right? If you have If your choice is I have to sell the house in order to live, then you got to sell. You're moving somewhere.

6:53 Then you're kind of forcing your situation. So, obviously aging in place is created with some access to that equity. One of the other things about a line of credit, having done a bunch of lines of credit, home equity lines of credit, HELOCs as a mortgage originator back when I was doing them is that they're difficult it can be difficult to qualify for.

7:15 That the They might be easier than a traditional first mortgage, but they're very rigid. I mean, you have to look a certain way. Many times seniors have, you know, tax deferral or they are they're living on withdrawals from their savings and sometimes the banks aren't as adept at qualifying that income as they are say a salary, right? So, talk a bit about the qualifying for some of these second products. Are they similar as far as income base or is there more flexibility? What's the difference?

7:43 Flex- There's going to be more flexibility because again, there's three of them out there that I particularly like. There's the HomeSafe Second that requires no payments. The downside of that is it gives you all your money up front. And for some people, that's not a good thing, okay? But since there's no mortgage payment, it's pretty easy to qualify for, okay? It's more of an equity-based situation. Then there's a traditional interest-only HELOC. The differences is in a traditional home equity line of credit, your ability to borrow has a limited time horizon, typically 10 years. And then you have to repay back that second. And that's where we see that nuclear option. All of a sudden, your payment went from an interest-only couple hundred to $800, $900 a month, and you're selling your house. This particular interest-only is just that. It's interest-only. So it stays interest-only for the life of the loan as you meet very much the same terms as you would on a traditional reverse mortgage, primary residence, etc. And then there's a 1% loan out there that charges 1% of the loan amount. So again, it gives you a maximum payment. So three different products, three different equity situations, three different qualifying situations, but gives you a lot more flexibility than that traditional HELOC that was designed for the active working consumer. And even those people will get in trouble by it.

9:12 I always thought those loans were best for people had a business. They're putting money out to buy a building, buy equipment, invest in their company, do an acquisition. It 10 years you could access it, then after that you had to start paying it back at a pretty steep payment. So thinking was you built your income up, and 10 years from now you have more income coming in to pay it. And then I also know that these banks there's like you know, finally written rules that when the banks had trouble financing, they just cut off people's lines of credit indiscriminately. The lines of credit you're talking about the ones that at least are FHA guaranteed, you have the right to that to that line of credit. It's not going to get cut off by the bank.

9:49 No, so for a traditional HECM, home equity conversion mortgage backed by FHA, the line of credit is actually backed by FHA. If the lender goes out of business, FHA will continue on with the line of credit. These other ones are proprietary, so there is some risk to that, but they're not geared towards the home equity line of credit the tradition we'll call it the traditional HELOC is was always geared based off of bank assets. So, the way they were securitized was a little bit different. These are securitized more on the open market through selling of bonds, etc. So, little bit more flexibility, investors understand the background, and they do the math a little bit differently. What we want to avoid though, and I want to make sure we get in this because there's so many, you know, 5 years ago there was nothing. 5 years ago it was a HECM or a traditional second home equity line of credit or a HELOC or a fixed home equity or a fixed home loan for a 30-year period. There's a new product out that I think people need to be very aware of, and that's called an HEI or an equity share. In fact,

11:00 Ask about that cuz I see these advertisements and these deals they sound so good to be true. And let me just back up a little bit because I wanted to I definitely have my list to ask you this question. The reverse mortgage is the most unappreciated financial instrument in the toolbox, meaning it's one of the most powerful tools, and yet it's one that is so often just written off by people who know a little bit about it. They may know the what I call the reverse mortgage 1.0 version, which was really abused by planners and other people and then there were regulations and rules limiting all that and we got re-launched. And I think second, because the association is with just me who needs the money desperately and that's their only solution, they write off the whole product but in reality it's becoming very sophisticated tool. That said, there's imitators that draws in some scam artists. And one of the things I've noticed is as if you're watching any sports on cable TV, so what do I watch cable is when I'm watching so the ball game or something, advertisements for these programs that sound like reverse mortgages but they're not. They're shared appreciation and reverse mortgage importantly is not appreciation. There's no equity involved. These are wholly different products. Talk about the difference between these shared appreciation programs which are usually horrible deals for customers versus the reverse mortgage.

12:24 Okay. So, the here's the big difference. In a reverse mortgage, it's a it's a mortgage. It's government regulated. It's been vetted. It's been seasoned. We know how it works. And never at any point in time does the outcome of that mortgage directly affect the amount of equity that you have in your home because of the mortgage. In other words, it's predictable. Yes, if you're not making payments, you're losing you're not losing equity, you're consuming equity. But where the HEI is so different is they become a joint owner with you in all practical matters.

13:05 How could that go wrong? No, not at all. You know, the investor doesn't come back in 10 years and say let's see I lent you $15,000 based off appreciation which neither one of us gets to control. I now have $200,000 equity in your house and I want it.

13:21 Yeah. And that's effectively we've done the math on these things and it's amazing how because again it is appreciation based. So, the better the house appreciates, the more money you lose.

13:34 Right. Course, you always own the money, no matter what. So, I literally had someone call me and their husband I want to say they borrowed $10,000. It was an ungodly low amount of money. We had to sell our house. The home equity investment came up due and payable. There was not enough money in there to do a reverse mortgage by the time we paid off their equity. And so, a house that she expected to live in for the rest of her life, these things do have due dates. And the investor can call it due. Whereas, a traditional mortgage, as long as you live by the terms of the mortgage, there's you know, the due dates are very controllable. So, unsophisticated, they're told, "Hey, you don't have to qualify. We just give you money. It's simple."

14:18 Sure. Nothing is that simple. If you're giving away the equity of your house, the appreciation, and more importantly, not only the equity, but future appreciation, compound on compound, it is the amount that you pay for these things is ungodly, which is why some states, I want to say Maine or Vermont, just banned them.

14:38 Correct. I think one has and one's considering it if I'm not mistaken. You know, I think that this is part of a bigger dichotomy in our economy where you know, we've had this amazing experience in America called capitalism and you know, businesses helping each other. Business based on creating value for customers. That was my business proposition, still is. If I create value for families who are inheriting property, help them find their way through the maze of legal things, and do the right, you know, the reverse mortgage is called due cuz the parents pass, that's how I get paid. But we have these large corporate conglomerates who are trying to find ways to do business without any human interaction. And all And my experience with that is always it has to sound too good to be true. And they have to deliver in a way that you just can't look at that carefully. And so, if you're watching an ad on in between quarters of a basketball game and then you called in, who are you talking to? Well, you don't know. They could be anywhere in the world. They could be anywhere in America. They could be honest or dishonest people. And the company can close the next day and reopen with a new brand. You would never know they're a new company. Versus Bill Gross, me, you, David Rider. I've been in this business for almost 40 years and I you've been in it for I think 25 plus as well.

15:56 85, so however long that is. Same as me, I'm guessing. One more than me. That's 41 years. Okay. So, oh, look at you. One more than me. That's not too many people But my point is I'm still in business. I've never been sued. I've never had any complaints on my DRE license. Because I take care of customers. I don't have them call in and trick them to some loan that takes away or shared appreciation program that takes away their equity. Talk about the importance of you having relationships with the customers you do business with. It starts with a phone call. It starts maybe a podcast like this. But I know how you do business because I feel myself it ends up in a relationship with you.

16:32 Yeah. So, you know what's Nothing wrong with the call centers. They're selling a product and as a general product they, you know, they do what they do. Here's the difference. That person on the phone's never going to know who you are. They're never going to know what's important to you. They're not going to have the conversation what about the kids, what about the grandkids, what type of legacy do you want to leave? Or and this comes up No, we got to be careful because you might have kids that are a little bit predatory. A little bit, you know, what's what I find a lot of not with every one of my customers, but I find with a certain group of my customers, I end up becoming the trusted brother-in-law for lack of better words. That person that they can go to cuz their family may not I was reading an article today, the financial education of America is not that great.

17:24 No. It really isn't. And so, having someone that you can call, that you can talk through options. You know, many half of my phone calls on a day-to-day basis has nothing to do with getting a mortgage. It has more to do with how do I how do I go on? What do I do? We you and I talked about and I won't go into detail, but we talked about health issues. You know, that becomes a conversation with people. How do how do you do that? I just went through a one-day conference at NORMILA. And this is so exciting. There is technology now that can basically, as you walk by it, check your blood pressure, check your pulse, check your oxygen rate. They have caps that goes on pills that will notify a family member if that cap is not open on the regular at the pre-scheduled time that it's supposed to do. We have so many ways as we get older, we have so many ways that we need assistance. And one of those areas that we need assistance is someone who knows what our financial situation is, can give us honest advice. Of course, a financial planner is wonderful for that, but not everybody feels like they can have a financial planner. So, that's where people like you and I come into play. You know, the layman, if you will. Not that we give financial advice, but at least we can talk it through without bias.

18:39 I feel like the I mean, I'm amazed at technology. I think you and I in the past have talked about AI. It's an amazing opportunity, amazing time to be alive, amazing time to be in business. But, the reality is, the vast majority of these improvements today are being seen at the big enterprise corporate level because these are very still very sophisticated tools. They're trickling down to consumers, and we all I'm sure have used ChatGPT to ask questions and so on. But, we're somewhat these large corporations are somewhat like in a battle for our data. And they treat us like numbers. And the problem is, if you don't have good advisors to help you're really outgunned when it comes to making these kind of decisions. And we talked today about reverse mortgages, three or four other secondary products that can access your equity, and this home equity stealing program, whatever you want to call it. We've named out like five or six programs, any one of which could be the right solution for you as an individual. The key is to help walk you through somebody who's not biased to look at all your options and say, "This is the best one for you, and here's why." So that you understand it. I think that's the thing as an agent I try to say to my customers all the time, there's no stupid question, it just means I didn't explain it properly. My job is to not just explain it, but explain it so that you get it. So, again, I think David, that's one things about you that I really met from the beginning, came across to me as a personal relationship, and that you are an advisor. What is it talk about also getting involved with somebody who does have maybe an advice team, and maybe they have an accountant, maybe they have an estate planning attorney. How do you get involved in that? What's that relationship look like? Is it just one-on-one with the client, going back and forth? Do you get involved with some team meetings? How does that

20:18 Oh no, we get involved with some team meetings. So, we have a Senior Resource Mortgage, which is the name of my branch. We have a very set procedure when we deal with financial planners. First of all, no surprises ever. You know, that's the that's what makes financial planners afraid to sometimes incorporate our tools. Is they're afraid of the of the surprises. So, no surprise ever. Always communicate with the financial planner first, get their guidance before we go down any road. Because they may have Yes, I get to see some assets, but I don't know what the other plan is.

20:52 Right. And so, all of a sudden, if I start going right and they're planning on going left, then we have problems. So, never a surprise. The key with working with a financial planner, never surprise. They're talked to as much if not more than the consumer, cuz they're placing a lot of trust in you to not take that consumer down the bad path.

21:09 Right. And if they have a higher degree of trust with the estate planner, that becomes the central person to work through. And again, it's important that these options are evaluated, maybe and crossed off the list. Okay, no good for you, no good for you. Fine, at least we've looked at them. But to not do that, I think is not professional. So, again, for those who watching today, I think it's real exciting to see we're trying to encourage and highlight reverse mortgage originators who are available individually to work both with you on your plan. Cuz it's not the right tool, it's the right tool for you that matters, as well as to work with your professional advisors, whether they be financial planners, wealth managers, estate planning attorneys, real estate agents, you know, we all want to work together to get our customers the best possible. David, thank you so much for you know, I know that you have all kinds of resources for seniors. I think you also have tremendous experience and certifications in your business. And I want to really encourage people, if you have questions on it, to reach out to him. I guess pick up a phone call. Well, how's best for people to get in touch with you?

22:06 You know, so I'm 64 years old. The phone works great. I actually answer it. You know, it's an amazing device. You press some numbers and there's a live person on the other side. [phone number] [phone number]. You can text. I know how to text. Now, here's where you're not going to find me. I'm not on TikTok. I'm sorry. Just not on TikTok, so wouldn't know how to get a hold of me on TikTok. But, you know, otherwise, LinkedIn, Facebook, email, phone. I always like the phone.

22:42 Or call me and I'll put you guys together cuz if you're driving and listening to this, they have a dumb chance to write down the phone number. David Rider is one of my favorite originators in the space. I think I met you last year at the Norm Alo conference in Irvine, maybe? Is that where we first met?

22:54 We could have. You know, with faces like ours, it's hard to forget. Exactly. But, one of the top in the business, certified reverse mortgage professional, David Rider, Next Evolution. Thank you so much for being on the program today.

23:06 My pleasure, Bo. Appreciate it. And for the rest of you, this is the Reverse Mortgage Podcast. We drop a new episode every week. Usually with top originators in our experienced and certified in the reverse mortgage space. Not always as knowledgeable as David Rider. That I thought that was so helpful today. Love to get your feedback though. Send me your notes, comments, up or down, save it, share this. If I can help in any way, please reach out at BoGrowsEquity on social media. As always, make today your