What are Reverse Annuity Mortgages?

Posted By : Aubrey Mead , on Apr, 2016


Reverse annuity mortgages, also referred to as reverse mortgages or home equity conversion mortgages, allow homeowners to gain access to the equity in their home. Restricted to those over 62 years of age in the U.S., reverse annuity mortgages allow homeowners to supplement their retirement income. The quantity of income a borrower receives depends upon the home’s value, interest rate, borrower’s age, and expected property appreciation. The amount of the loan is calculated so that it won’t be higher than the value of the home over the loan’s life.

Monthly payment received

A borrower may obtain the proceeds from reverse annuity mortgages in many ways. The most typical way includes receiving a month-to-month payment that’s used to supplement a borrower’s pension, Social Security, or additional retirement income. Also, the proceeds may be taken as a lump sum or as a line of credit that is drawn on as necessary. The best reverse mortgages produce tax-free payments.

Qualifications for reverse mortgage

Within the United States, the sole qualifications for reverse mortgages are that borrowers be at least 62 years of age, that they live in the house as their main residence, and that all existing mortgage upon the house is paid off by a reverse mortgage. The reverse annuity mortgage lender doesn’t require a credit check or additional income documentation because a borrower won’t be making any loan payments. There will be closing costs and origination fees related to reverse annuity mortgages. Those fees typically are rolled into the principal quantity and accrue interest within the lifetime of the loan.

As the last surviving borrower passes away or moves out of the house, the reverse mortgage is paid back, generally by selling the home. The quantity repaid to the lender includes the sum of all the payments which were made to the borrower, in addition to accrued interest. All equity remaining on the property after the mortgage is paid back belongs to a borrower or borrower’s estate.

The best reverse mortgages arrangement may offer much-needed extra income in retirement. It’s particularly appealing to people with lots of equity in their house and few additional liquid assets to supplement their retirement income. It’ll allow them to stay in their house, and still have the income necessary for retirement.

For more information on the best reverse mortgages, contact Longbridge Financial today.

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