The reverse annuity mortgage was made with the purpose of giving senior citizens and easy way to tap into the equity in their homes. This type of loan has the lender paying the borrower every month rather than the other way around. This included with the fact that the loan is not paid for until the home is sold or the owner dies makes it a beneficial way for someone over the age of sixty two to get a hold of money without the fear of losing their home. Just like any other loan however you need to make sure this is the right choice before proceeding.
This type of loan similarly to a home equity loan can either be taken on in a lump sum, monthly payments, or in some cases in a line of credit. The main difference between this and a home equity loan is of course that the borrower will not have to pay back the loan in their life time unless they decide to sell the home. They will be able to continue living in the home for as long as they want.
This means that the home however cannot be willed to anyone since it will need to be sold in order to pay for the loan. There are cases that lenders will be willing to work something out with the family if they are looking to keep the home.
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Groshan Fabiola
http://www.articlesbase.com/business-articles/reverse-annuity-mortgages-113255.html
February 28th, 2009 at 8:02 pm
Reverse Mortgage. Should she get an annuity?
My mother has a line-of-credit type Reverse Mortgage. She really could live without it but now that she has it, can she get an annuity, and will that be a wise decision. She has had the loan for 1 year.
March 1st, 2009 at 1:04 am
Reverse mortgages should be a "last resort" move.
The problem being the lenders take a huge amt. in interest -
much like a "regular" mortgage, in the early years of paying..
Example: On a regular mort. if your payment, in the early years, is $700 – as much as $550 of that payment can go to interest (and not into paying off the debt)!
So a reverse mort. causes you to lose a lot of the equity you built up in the house – because the same kind of interest is being taken by the lender.
As I recall, you're given several options of how you want the reverse mort. to pay out – monthly, annually, or "as needed".
And, I believe the only one of these 3 options allows any interest to be earned by the mort. holder is the 3rd option.
I believe the best option is – the 3rd option -to leave
the funds in, earning a little interest, and draw off large sums as needed. (especially if she doesn't require the funds for normal expenses) That way, at least you're "re-earning" some interest money.
The reverse mortgage programs vary from lender to lender. Of course, it would be great if you could speak to a knowledgeable loan officer.
References :
March 1st, 2009 at 1:06 am
what kind of annuity?
no to a fixed period of years annuity, maybe to a life long annuity
References :
http://www.reversemortgagepage.com