AAG doesn’t use the term reverse mortgage liberally anymore, however they still tout U.S. seniors can stay in their homes without any monthly loan payments.
I ask you, as a senior with a paid off mortgage and a house full of equity, why would you want to “borrow the equity,” which is already YOUR money?
It doesn’t make good cents!
Why do I think a reverse mortgage is a pig in a poke?
A pig in a poke is a thing that is bought without first being inspected, and thus of unknown authenticity or quality, and that is what a reverse mortgage is when you read between the lines.
The idiom is attested in 1555 to: “I wyll neuer bye the pyg in the poke. Thers many a foule pyg in a feyre cloke.”
As you may know, a “poke” is a bag, so the image is of a concealed item being sold.
I live in a home that isn’t nearly paid off, but I am a senior and somehow I got on AAG’s mailing list.
In case you didn’t receive this mailing, I will share it with you to decide whether you would “borrow” your own money, after reading it.
“Is this property your primary residence?
Was at least one homeowner residing there born before June 28, 1957?
Then you many be eligible for a government-insured Home Equity Conversion Mortgage (HECM).
This special loan allows U.S. seniors to stay in their homes without having to make any monthly loan payments.
Your New Monthly Loan Payment If Approved: $0.00
This is not a misprint. No monthly loan payments are required with a HECM loan from AAG.
If you qualify and your loan is approved, a HECM must pay off any existing mortgage(s).
With a HECM loan, no monthly mortgage payment is required. Borrowers are responsible for paying property taxes, homeowner’s insurance, maintenance, and related taxes (which may be substantial).
We do not establish an escrow account for disbursements of these payments.
A set-aside account can be setup to pay taxes and insurance and maybe required in some cases.
Borrowers must occupy home as their primary residence and pay for ongoing maintenance; otherwise the loan becomes due and payable.
The loan also becomes due and payable (and the property may be subject to a tax lien, other encumbrance, or foreclosure) when the last borrower, or eligible non-borrowing surviving spouse, dies, sells the home, permanently moves out, defaults on taxes or insurance payments, or does not otherwise comply with the loan terms.
IMPORTANT DISCLOSURES REGARDING GOVERNMENT-INSURED HECM LOANS
A Home Equity Conversion Mortgage increases the principal mortgage loan amount and decreases home equity (it is a negative amoritization loan).
AAG may forward your contact information to such lenders for your consideration of HECM programs that they offer. V2019.04.17
*AAG makes every attempt to ensure the home value information provided is reliable, however we provide this information with no guarantee of the accuracy and are not responsible for any errors. This is an advertisement.
These materials are not from HUD or FHA and were not approved by HUD or a government agency.
Getting Started Is Easy…”
After reading this you may think there’s nothing wrong with it, and depending on a person’s circumstances and situation, it may be their financial salvation.
All I ask is that “buyer beware” and consider other options that may be more conducive to cashing out your life’s heart and soul.
If you don’t want to share your hard earned equity with a lender, then the best option is to sell your home outright.
And, depending on how much it sells for, you may be entitled to a nice capital gain, which could offset a huge tax bill.
For example, if you decide to sell your main home and lived there for at least two of the five years preceding the sale, you avoid paying tax on up to $250,000 of capital gains on the sale.
If you’re married and file a joint tax return, double that amount for a hefty $500,000 you get to keep tax free.
All other options require some type of loan process to extract some (not all) of your home equity.
Conventional financial wisdom says that a reverse mortgage is fine, if you are house rich and cash poor, with lots of home equity, but not enough income for retirement, and you WANT to stay in your home.
The bottom line is: you can’t have your cake and eat it too—unless you sell your home.
If you don’t want to sell your home, then you will have to share the home equity with whomever lends you some of your money against your home’s value.
Believe me, I have been house rich and cash poor, so I decided to sell a home I once owned and kept all of the home equity.
If you don’t mind starting over with a smaller house that you can purchase for cash (it doesn’t have to be a shack), then you will have plenty left over for retirement—if you are prudent with it.