That is great. Your kids said that, really? They said that to you?

Absolutely. Absolutely. I did the whole mom PTA stuff for a whole year and they said, “You’re driving us nuts.”

Oh, my gosh. That’s funny.

I went back to work with a local broker that specialized in mortgages only, because then I could schedule my life around them.

Yep.

It was there that I started to learn about the reverses.

Okay. What made you decide to move into that completely?

Well, probably a couple of things. One, it intrigued me the more that I learned about it and figured out how they worked. But two, that was also around the time when the mortgage world was going a little crazy…

Yeah.

And everybody and their brother was offering mortgages that probably should not have been done.

Yes.

I just did not like what I was seeing. I wasn’t comfortable with it. I couldn’t put somebody into a loan that wasn’t going to be beneficial for them.

Good for you.

Go ahead, I’m sorry.

Does that mean you actually had some ethics in the mortgage industry?

I hope. That’s the way I’ve always looked at it.

I think that’s wonderful. That’s really great to hear somebody say that.

The good people, the people with the ethics, they have survived it.

That is true.

They’re still around.

Yep.

There’s very good people out there. Part of that got corrected because of the licensing and the protocols that were put into place, and so those fly-by-night people, hopefully, have all disappeared.

Good.

At that same time, I got into reverses, and really got intrigued with it and learned a lot about the product. Keeping in mind that the baby boomers, if you want to call that category, they’re turning 65 at a rate of about 10,000 people a day.

Baby boomers are turning 65 at a rate of about 10,000 people a day. Click To Tweet

Yeah.

The market is there and nobody’s ready for a proper retirement. Well, not many people are ready for a good retirement.

Not many people are ready for a good retirement. Click To Tweet

And the largest asset most of them have is their home.

Absolutely.

Tell us how reverse mortgages work and why that’s a good thing to have the equity in your house?

Well, I’m gonna start maybe a little bit with retirement. When people go into retirement and that paycheck stops, the next thing is, well where is your source of income going to come from and how are you gonna survive in retirement? Obviously the first one is social security, that’s the mainstay that’s been around for awhile, that’s always in question if it’s gonna be maintained or whatever.

Yeah.

That’s always your first bucket, so to speak, that you’re gonna draw money from. You have social security. Your second bucket might be a pension or an IRA, but pensions have started to fade away. The millennials are not seeing those at all, some baby boomers have them, some people have IRAs. Then your third being portfolios, type of money that you might manage for them, and that’s where people really got the bulk of their income from for retirement.

Yep.

The house was never included. What people found that the biggest fear, when you do a survey with anybody, is am I gonna run out of money? Am I gonna have enough money in retirement? Back in 1989, under President Reagan, the reverse mortgage was actually born. It’s morphed several times since then and become a better product because of the changes they made. But it was designed to help seniors, meaning 62 or better is the way I like to describe it…

Click To Tweet

Yeah, I noticed that. That was pretty cute. 62 or better.

62 or better. Right?

Yep.

It was designed to help them stay in their home through retirement. What it does is it brings the house in as another bucket, or another source of funds for retirement, for cash flow. Don’t necessarily want to call it income, but cash flow. That’s really what the whole premise is about, is to include it as part of the financial planning for retirement.

Okay. How does that work?

Well, what it basically does is it takes into considera— It’s a lot different from the forward mortgages in the sense that we’re all accustomed to a payment based on an interest rate and a term of say, 15, 20, or 30 years.

Yeah.

With the reverse, it’s based on the value of the house, the life expectancy of the borrower, or the younger borrower if it’s a husband and wife, and the interest rate. And then how you choose to take the money. One of the key things I really like about a reverse is that you can customize it for various circumstances. Your situation is different from mine and from the next person I talk to, so it really does allow you to customize it based on what’s going on. Getting back to what I said before, achieving your goal, whether it’s cash flow or money for long-term care, any of those kind of things that you’re trying to accomplish by including the house in your plan.

Okay. Besides just the obvious of you want to live in your own house, what about if you want to move to some place else and buy a house? Does a reverse mortgage have any value there?

Absolutely. The buying reverse mortgage, or H for P as we call it, a HECM for Purchase, that came out in 2009. Again as I said, the market has evolved based on what people are looking for.

I’m gonna back up a little bit. The traditional reverse and the very first question you have to ask yourself, is do you want to stay in the house? It’s basically a refinance, where you’re gonna refinance and determine the value of that home, how much you can take out of it, which is usually somewhere in that 50 to 60% range based on age. And then determine how you want to receive it, whether it’s a lump sum to pay off a mortgage, getting rid of the mortgage payment, because with the reverse there’s no payments required, the balance goes up instead of going down, which is why it has its name.

You might pay off a mortgage with the lump sum, you might choose to receive a monthly check to help with your cash flow, or you might have a line of credit for those emergencies or tax bills that come out, or a combination of any of those kind of things, again, based on what they need. That’s your traditional reverse. Basically it’s a refinance. The purchase product, and HUD calls it a Home Equity Conversion Mortgage, or a HECM, which I know sounds like you’re clearing your throat, but that’s the acronym for it.

That’s good. That’s a good way to remember it.

Yeah. The HECM, or the H for P, the Home Equity Conversion Mortgage for Purchase, allows those people that don’t want to stay in their current house, that want to rightsize, meaning they may want to relocate closer to children, they may want to get rid of the second floor. We have a lot of houses around here where the bathroom’s on the second floor, the laundry’s in the basement, and the knees go.

Yeah.

They want that one-floor living because they want to stay there.

Yep.

They decide to relocate into that newer house, so they sell their old house. The philosophy was, okay you don’t want a mortgage payment in retirement, so you sell your old house, take all of that cash, roll it into a new one, and you’re done. Well, a lot of times what happens is you sell that old house, realize you might not have enough money to get what you want where you want it, and now you think, “Well no, I’m stuck. I can’t move.” In reality with the reverse, with the HECM, you’re actually allowed to purchase the house pretty much for about 50% of the purchase price. So, you find that $300,000 house, you put 150 down. The other 150 is the reverse mortgage and you basically have a mortgage on the house with no payment.

That’s sweet.

It does allow people to move, or to rightsize-

Yeah.

To get what they want where they want it.

That’s really good. I don’t think people really understand the use of that for that purpose. I think you’re right that people feel like they’re stuck and they can’t move because of whatever reasons, but I think that’s a very interesting alternative that people should really consider. I like that.

The other thing, if you want to go on that same mindset, again coming up, this is a financial tool to use for various situations. Unfortunately, we’re at a time where a lot of people get to retirement, 62 or better, and suddenly they’re faced with a divorce.

Yeah.

They want to start this new part of their life, but they don’t want to continue in an unhappy marriage. But now they’ve gotta split the homestead. One wants to stay, one wants to go. You can do two reverses. The person that wants to stay can do a reverse, take out, let’s say, 50% of the value so that the person that’s leaving gets half of the value of the house. Now that person that stays there has a reverse with no mortgage payment, but still maintains their lifestyle. The person that left now has a 50% deposit on the same style house or same price range house, so to speak, can go forward, get their equivalent lifestyle, and again, put the down payment, get a reverse, not have a mortgage payment.

Wow. That is incredible.

It’s a strategy, educating financial planners that are talking with people trying to plan for retirement, talking with attorneys that are, again, may be talking with people about retirement, wills, power of attorneys, etc., divorce.

Yep.

Another strategy might be social security. As you may know, social security has a whole bunch of different scenarios. When do you take it? How do you take it? How old should you be? How long should you wait? Can you take it off of a spouse’s benefits? All those type of things. But some people want to retire at 62, don’t want to collect social security till 67, so again, tap into the house, give yourself some cash flow for a couple of years, and delay social security.

Yeah.

Another strategy.

Yeah. That’s very interesting. I didn’t know that. I think that’s a great concept, especially if you’ve got all that wonderful equity in your house that most people do have but they have no idea that it’s of value.

Right. A lot of people still have that mentality, “Oh, I have to leave the house to the kids.” We all want to leave a legacy of some extent to our children. I have two boys, absolutely, those are my most important assets. But a lot of the kids don’t live here anymore.

Right.

They have their own house.

Yep.

They don’t want the family homestead. You’re not seeing everybody staying in the same place anymore.

Yep. Yeah, that’s true. I think that’s a very good point, is that even if you’re somebody looking at… You have financial stability, but you also have children none of whom ever want to come back to that house, why not consider doing this reverse mortgage and generating more income for yourself, and enjoying your retirement with the idea that there’s no need for house after you’re gone?

Well, and if you take it out of the house versus the portfolio, say for example following your point—

Yeah.

When you pass on, it’s much easier to liquidate a portfolio than it is to liquidate a house.

You’re absolutely right.

You’ve got to list a good realtor, you’ve gotta find the right seller-

Yep.

Or the right buyer, and it just takes time.

It does, but I think that’s a good point. I like the idea that you’re looking at all the other alternatives. And most people, I still think have a very traditional perspective on what is a reverse mortgage, “It’s for my house where I live, so I have to get some stuff out of it so I can have a better retirement.” But it’s so much more than the house you’re living in. I think people really literally need to expand their perception of what this is, because it has so much applicability. It’s crazy and nobody knows it.

Yeah.

Best kept secret in town. Not now, no longer.

A lot of people. One of the major misconceptions, and I really don’t know why it ever came to be, but one of the major misconceptions is people think if they’re doing a reverse mortgage, that they’re giving the house to the bank.

Yeah.

That’s not true. The first thing, banks don’t want houses. They don’t want to foreclose, they don’t want to have a real estate department. Banks want interest. That’s basic concept.

Yep.

You’re not handing over the ownership of the house when you do a reverse. The deed, which is the legal document that says you own it, stays in the owner’s name. We file a mortgage just like any other mortgage. If you pass away and you have a regular mortgage that you’re making a $500 payment on every month, your state still has to sell that house, pay off the mortgage, and whatever is left, disperse to your estate. It’s the same exact thing with the reverse, that the state has to sell the house and if a family member wants to buy it, just like in the forward world, they can, but the house has to be sold and it has to be liquidated.

Now, one of the pluses with the reverse is when it comes time to liquidate it, and let’s just say you outlived every prediction and the house value went down, which unfortunately we saw in around 2008, and let’s just say you owe more on the house than what you can sell it for. Because the loans that I’m talking about and that I offer are regulated through HUD, there’s mortgage insurance through FHA. I’m sorry, HUD, the Department of Housing and Urban Development, so people know what I’m talking about. Mortgage insurance says that the homeowner is never responsible for anything over for what the house sells for. They can’t go after your estate if the house is overdrawn. They can’t go to your kids because the house is overdrawn. At that point, you would turn the house over to the bank.

That is really an incredible advantage. It’s enough reason to really look at that. Especially what we talked about before, when you have children living nowhere near the house, it is so hard for them to have to be responsible for selling a piece of property that they’re not anywhere near, and trusting that a realtor is gonna take care of all that stuff for them. It may not even be someone they know. This way it’s clean and simple, and it’s done. Yeah, that’s great.

It’s a tool like anything else that is not necessarily right for everybody, but it’s something to be looked at when you’re making that retirement plan. As we all said earlier, is it’s all about achieving the goal, what to do you want to accomplish?

That’s right. That’s right. Is there anything else you want to say about that before I switch over to letting us find out something about when Nancy Burns got her ideas about money?

Oh, I think we’ve covered that pretty good.

I think we did too, so let’s jump into this one. As I’ve said before when I started this show, that I really think that so much of who we are, what we become, it is due in big part to the ideas and belief we made up about money when we were in our formative years, let’s call it that.

Okay.

Let’s go back and take a look at how you formed your own ideas about money. What was your family life like when you were growing up?

Well, it all started with the hardware store. My parents were sole proprietors and had their own business.

Yep.

You really learn a lot when you’re living in a house that is a sole proprietor. Nobody works nine to five, like your typical banker.

Right.

You work all the time.

Yep.

Whether you’re bringing your bookkeeping home at night, my mother was in charge of books.

Yep.

And my father ran the business, as we say he liked to play “store.” But on Sunday afternoons, I would help him put lawn mowers together.

Okay.

Yeah. Summers, winters, three daughters all had to work at the hardware store. I learned right off the bat, and now this may not be directly with money but it will come around, because I was there, because I was learning, I worked at the parts counter.

Okay.

Men would come in and say, “I need a part.” I would ask them if I could help them and the response I got most of the time was, “No, I’ll wait for a man.”

I knew you were gonna say that.

Yep.

Yeah, we’ve been there. Okay.

Yep.

What did you say to those awkward, crazy people?

Yep. My father would always say to me, “They just don’t understand. Don’t get mad. Just move onto the next one.”

Okay.

He was a very positive influence in that way.

That’s great.

And I would. I would move to the next customer who maybe knew me or gave me a chance…

Yes.

Would wait on them, get them what they needed very efficiently, while this other guys was still waiting for the man. And two customers later he would finally talk to me and I was able to wait on him.

And you didn’t rub it in his face?

No. I had a very good father, God love him he’s still with me, and he would say that, “You just gotta move on. You can’t get mad. You just gotta keep moving.”

That’s great advice. That’s great advice.

Yeah, so that was basically the start of my business career.

Okay.

Now fortunately at the hardware store I also met my husband, so I have to give them credit for that.

All right.

But I also met the president of the bank.

Oh.

When we was working there on summers and through college.

Yeah.

That’s what got me my job at the bank.

Okay. Now where were you, first of all, in the birth order? You said you had two sisters?

I’m the middle child.

Okay. All right.

I have an older sister and a younger sister.

Did they continue to stay with your father?

None of us did.

Okay.

Other than growing up. He continued with the business and finally retired at 80, a couple years ago.

Wonderful.

And then eventually we did sell it to somebody else.

Okay.

But I still worked Saturdays with them for a while.

Yeah.

When my mom passed, I worked Saturdays, still at the hardware store.

Okay.

When I moved over to the bank, my second influence past my parents would’ve been my aunt, a great-aunt, that worked at the bank, and I watched her train men who then got promoted beyond her.

Yep.

And she worked there probably forty, fifty years. Her whole career was at the bank. She did advance, she did very well, but she fought for everything she got, and that was another positive influence that again, keep working hard and you will accomplish something.

Yep.

And I did. I was very pleased to be able to say that within four years, I was a branch manager, which was probably only the second female branch manager in the history of the bank at that time.

Wow.

Yeah. In the ’80s.

That’s great.

That was when nobody wore pants. You always wore a suit.

Oh, yes.

You always wore vests. And the bankers were all men.

Yep. Yep. Let me ask you this question, as being involved with a business and then into banking, what was the first memory you have about money? When did you understand what money was and what it can do?

Well, okay. I obviously was working. I gave piano lessons.

Yeah.

I worked at the hardware store. So yes, I always had money. I will tell you this, you realize how important money is when you don’t have it.

Oh, yeah. Oh, yeah.

Right?

Yeah. But where did the money come from? Did you get paid when you were working or did you get an allowance?

No, I got paid when I worked for my dad.

Okay. Even as a young child?

No, probably not until a teenager.

Okay.

Yeah.

So when you needed something, how did you get the money to pay for it?

Well, probably worked. Worked the Saturday.

Okay. And so whatever you needed, you got by working.

I would say yes.

Okay.

I mean, my parents were very good to us, don’t get me wrong.

Yeah.

Yeah.

Okay.

My story about needing the money when you don’t have it, I worked one Saturday and went and asked my father for money because I was taking my future husband out for dinner.

Oh, wow.

And I said, “Dad, I need money. Can you pay me the whole bit?” He paid me the money, we started talking, and I left the money on the dresser.

Oh, no.

And we went out for dinner only to find out, as I proudly said, “I’m gonna pay for dinner,” to find out that I left my money home, and he had to pay.

Oh, my gosh. How embarrassing. And he still decided that you were the one for him even with that?

And he still kept me around.

That’s good. That’s funny. When did it occur to you? When you opened up your wallet and realized you had nothing in there?

Yeah.

Oh, okay. Well, that’s a very important lesson about money. What would you say has been the most threatening to your financial security?

Threatening? Well, right now I work on a commission-type basis and I think when you walk away from a weekly, normal, consistent paycheck, that can be a little frightening.

Yes.

‘Cause then you’re just completely dependent on your own as far as that goes.

Yeah.

That can be the frightening part. And just always making sure you have something put away somewhere for that rainy day.

Yeah. That’s good.

One of the first things, and they’re not even around anymore, but when I started at the bank, there was always Christmas Clubs.

Oh, yeah.

Do you remember those?

Yes, absolutely.

They were little coupon books, and every week you would pay a coupon. They started at 50 cents a week. When I started at the bank, I would always do a dollar a week coupon book to make-

For which? For Christmas or vacation?

No, I did it for our wedding anniversary.

Oh, okay.

So that I always had $50 for us to go out for dinner.

Very nice.

Yeah, I’m all about those little buckets.

Yeah.

…then spread out somewhere to cover what you want to accomplish.

Well, what would you say are some of the best and the worst financial decisions you’ve ever made?

Personally?

Yeah.

Best and the worst. I don’t know if I can answer that right off the top of my head. I’d really have to think about that.

Well, a lot of people say buying a house was the best financial decision. I don’t know if that’s true for you, but that’s one that everybody throws out. The worst is probably something along the lines of an investment they made that tanked. I don’t know if any of those are relevant, are they?

Well, our first house, when we bought our first house in the ’80s, my first house was at an interest rate of 15 percent.

Ow.

‘Cause that’s where mortgages were.

Yeah.

Fortunately being a little naïve and young…

Yeah.

We just needed a place to live.

Right.

So we could afford the monthly payment. Life was a lot different then. And we bought a house at 15%.

Wow.

That’s probably how I got into mortgages, ’cause I learned how to refinance that as soon as rates went down.

All right. Yeah.

That’s probably a good and a bad decision at the same. If you look—

Yes.

—at it from an interest rate point of view, it was bad.

Yep.

From an investment point of view, the house eventually doubled in value because again, the timing of the whole thing.

Yeah. Well, that’s great. A good and bad all in one. That’s pretty good.

Yeah.

What are the events that have happened in your life that you would describe as defining moments?

Definitely having my kids.

Yeah, okay.

Absolutely.

When were they born in your life cycle here of going from forward mortgages to reverse mortgages?

Oh, I was still in the forward world when I had them. I was still at the bank. I kiddingly used to joke with the president of the bank and said, “I had my kids on bank holidays,” which I did. Memorial Day and President’s Day are my kids’ birthdays.

So well done. That’s very nice.

So I said, “I didn’t miss a beat. I had them on banker’s holidays and kept working.”

That’s fabulous. After you had those boys, you went right back to work?

A couple weeks after, whatever the maternity leave was. Nine weeks, 12 weeks, whatever it was.

Yeah. Okay. Wow.

They kept me busy.

I’m sure they did. That’s very impressive though that you arranged that to have them on holidays. I like that. So where do you want to be financially five years from now?

Five years from now I want to rightsize to a new location.

Okay.

When my kids settle down.

Yes.

‘Cause they’re still moving and trying to figure out what they want to do.

Yep.

And if grandbabies ever come along, you never know.

Yes.

But I would consider doing a reverse to purchase another house, when I’m old enough, to relocate.

Okay.

Downsize a little bit.

Okay, that makes sense. What’s on your bucket list?

Always travel. Travel is always on my bucket list.

Where would you like to go that you’ve never been to?

More out west, more like Arizona, Utah, those kind of places. I haven’t seen those yet, so I would like to see that.

Okay.

I haven’t ventured to Europe. If life settles down a little bit in Europe, maybe I’ll venture there.

Oh, yes. That’s a scary thing. Yes. Absolutely. What about things you’d like to do that you haven’t done as opposed to traveling?

Well, I know I’m never gonna jump out of an airplane, if that’s what you mean.

Oh, okay. Well, that’s good.

I do not want to do that.

That’s good. No, I just think some people have an idea that there are some hobbies or careers they’d like to pursue, but again, it’s not a bucket list because they just don’t think of it as being realistic or something that would ever fit into their lives. I’m just asking ’cause I get some of the most extraordinary answers to that question. Is there anything you’d love to do if you had the time, the money, and the ability to do it, assuming you still could? Is there anything that pops up for you?

I don’t have anything specific, but I know there’s something else out there.

Okay.

I want a fun job in retirement.

Okay.

Something that maybe I can share some of my knowledge, but have fun with it.

Okay.

Not all the pressure and goal setting.

Yeah.

Do you know what I mean?

Yep.

Just something fun. I haven’t determined what that is yet.

Well, that’s the next question. Do you ever see yourself being retired?

Somehow I think I’ll always be doing something.

But would it be something that you would be paid for? Is that important to you?

I don’t know. There’s a lot of good volunteer stuff out there too.

Yeah. There certainly is. Plenty to keep you busy.

Yeah.

But sometimes people absolutely say, “I could never see myself being retired.” Retired meaning the absence of a paycheck and the ability to just be full-time leisure or have the ability to choose volunteer activities, things like that, that would fill up their lives and make it meaningful. For me, I could never do that. I just don’t think I would be willing to say, “I’m gonna, you know, hang up my shingle and say, ‘I’m Done’, and go do something that I just hang out,” because I would go nuts.

No—

You talk about your kids kicking you out after… Yeah, I think the same thing would be true for husband. He’d say, “Would you please go out and do something?”

Yeah, I definitely will be doing something. In fact, I just talked with a customer that’s retired from their career, and you know what they do now?

What?

They are a taste tester for Hershey chocolates.

Oh, that’s fun.

Now, I think I could do that in retirement.

Yes. That sounds like a blast.

Yeah, so I think that there’s something out there, I haven’t figured out what, but there’s something out there that will keep busy.

That’s fun. That’s fun. Yeah, I get that. That would be fun. All right, so I have one last question for you. Would you do anything differently? Any regrets?

So far in my life, probably I would have continued on to do like a master’s degree, continue with more education.

Okay.

I would…

You can still do that in retirement, you know?

I know.

Okay. Just wanted to throw that in there.

All right. Well, I just want to say thank you very much to my guest today, Nancy Burns, who is a reverse mortgage loan officer with Retirement Funding Solutions. Nancy, tell us about the name of your website, because I love it, and where people can reach you.

Well, I tried to make that as easy as possible so that my website is reversemortgagelady.com.

I love it. Okay. Okay, and let me just close this up by saying to all of you in my Power of the Purse community, I hope today’s podcast was helpful in enriching your understanding of money and how it can help you achieve your life goals. If you’d like to spend 15 minutes on a call with me and ask me questions about your personal finances, please go to my website powerofthepursepodcast.com, select the ‘Contact’ tab, and find a time that works for you.

Thanks again, Nancy Burns, for sharing your time and knowledge. Is there any other way people can get to you besides your website? Is there some other way you’d like people to get a hold of you?

I’m always available by phone. I do come out to people’s homes to meet with them, because I work out of my home. My office number is 570-586-1554.

Okay, you want to repeat that?

570-586-1554.

Thanks again, Nancy, for sharing your time and knowledge. And until the next time, thanks for listening and remember, money is not the enemy. Your ignorance of it is. Thanks so much for listening and goodbye.

How to contact Nancy:

• Phone: 570-586-1554
• Website: www.reversemortgagelady.com