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Why Retirement Mortgages Can Be Confusing

I hear clients say from time to time that retirement mortgages are confusing and I do not disagree, they can be confusing. With that being said, I would like you to imagine this…you are hungry, but you do not know what you want to eat. Therefore, you go to the supermarket and you decide to walk down every aisle to see what they have before making a decision on what you want to eat. Do you think that after walking down every aisle, you would be more confused or have more clarity on what you want to eat? I personally would be overwhelmed and would most likely walk out buying nothing and drive to the nearest drive-thru for a burger and fries. Why? Because when we are overwhelmed with options, we become confused and we do not make any decision and we go back to what we know and what is comfortable.

The same thing happens with a retirement mortgage. Sometimes prospective clients become overwhelmed with the options and decide it is not for them and they go back to making a mortgage payment for the next 30 years which can be financially dangerous. Now, is that the best thing for the client? In many cases absolutely not. However, this is what they know and therefore they decide not to make a change, even though the retirement mortgage is probably better for them and will help them to live a better life in retirement, improve their cash flow and they will be more likely to achieve their goals.

So how does grocery shopping relate to retirement mortgages? Well, we must first understand that a retirement mortgage is a tool. As a matter of fact, I have heard some refer to a retirement mortgage similar to a swiss army knife because it is in fact a multi-tool. With this in mind, there are several different ways to set up a retirement mortgage which help to achieve different goals for the homeowner. Similarly, if I want to hang a picture on my wall and I need to put a nail in the wall, I am not going to use my hacksaw to hammer in the nail. True, I could use the handle of a hacksaw and hit the nail into the wall but it is not the most efficient tool for the job. In this case I would grab my hammer and it would be much faster and easier than the hacksaw. This principal applies to retirement mortgages as well.

You see, the retirement mortgage has several different options on how a homeowner can convert some of their equity to cash: you can get a lump sum, create a growing line of credit, set up a tenure payment, set up a term payment, or you can do a combination of these options. Therefore, if a client walks into my office and I simply tell them all the different ways a retirement mortgage works and all of the different options they have to access their equity and I don’t ask good questions, they will most likely walk out confused and do nothing at all. Therefore, it is important I understand the homeowner’s goals (both short-term and long-term), I need to understand their concerns and I need to know what keeps them up at night. Once I have a better understanding of all of this, then and only then, will I be able to suggest the best tool/strategy on how to use the retirement mortgage most efficiently. I have found over the years that this works best by asking a lot of questions. If I do not ask good questions, I do not necessarily understand the goals, or the concerns and it is very possible that a potential client can become overwhelmed and go back to their old ways which could again be financially dangerous.

Imagine this in comparison, you go to your doctor and you tell your doctor that your hand hurts. The doctor then says (without asking any questions), “Based on the information you provided, we can take an x-ray, we can put it into a cast, we can provide you an antibiotic in case of an infection, you could take an over-the-counter medication like Advil or Tylenol or we can do surgery to open it up and see what is wrong. How would you like to proceed?” If you are like me, I would run out of the doctor’s office as fast as possible and never go back to that doctor again. This would never be the case because this would be considered malpractice and the doctor would lose their license and most likely go to jail. So instead, what happens in that example is the doctor asks a lot of questions and feels around and does some investigating first and uses their training and experience. By process of elimination and after asking you questions, the doctor then provides you with a prognosis and a recommended course of action.

You see, I am not a doctor of course but I do feel that the same principles apply in the mortgage industry. There are hundreds of mortgage options and it can absolutely be confusing. So know that I am going to ask you a lot of questions and the more clarity we can both have on your goals, your dreams, your concerns and what keeps you up at night…the clearer we can be with you and discuss the best and most efficient strategy for you.

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