Reverse Annuity Mortgage – The Senior Home Loan
Recently, there has been a surge in interest in getting a reverse annuity mortgage. This type of mortgage makes it possible for senior homeowners to slowly take out the equity in their home. Senior homeowners don’t have to sell their house to collect the equity nor take out a traditional, home equity loan to do so.
Not every person will qualify for this type of mortgage. There are a few qualifications that a homeowner must meet. For instance, this type of mortgage is available only for those who are at least 62 years old. The home should also be paid off already and valued more than the reverse mortgage amount. The home shouldn’t have other mortgages or liens.
Homeowners who choose to go with a reverse annuity loan can either receive payment monthly or be paid in one large lump sum amount. Payments to homeowners are recurring since the mortgage is an annuity.
This type of mortgage is called a reverse mortgage because the normal order of things is reversed. Typically, a homeowner will pay the mortgage down over the life of the loan, until eventually they have a zero balance. They owe less and less money the longer they pay the mortgage and live in the home. A reverse mortgage does the exact opposite. A homeowner receives money instead of paying it for however long they have arranged so. The homeowner is taking out the equity in their home in the form of monthly payments.
As individuals get older and are unable to work, it can become increasingly difficult to meet their monthly obligations. This is particularly true if there are medical conditions that require people to be under the care of a doctor, be on medication, and even undergo expensive procedures. Those payments coming in from a reverse mortgage loan will be of great help to those who do need the money.
A reverse mortgage loan is also ideal for homeowners who have no plans of moving out or selling their home. Older people who own their home can benefit from the equity they have built. This mortgage is particularly helpful for individuals without any surviving family.
Now let’s take a look at reverse mortgage pros and cons:
Pros:
* This can be a good way for homeowners to benefit from the equity in their home.
* Home owners can continue living in their home. They don’t have to sell their home in order to collect on the equity.
* It offers supplemental (and often much needed income) for homeowners whose budget is limited.
* Homeowners don’t have to worry about their Medicare or social security benefits being affected.
Cons:
* It’s available only to homeowners who are at least 62 years old.
* Homeowners will develop a loan balance as they borrow against the equity in their home which will eventually have to be repaid.
* There are closing costs, origination fees upon setting up the loan and service charges or insurance premiums.
* The home can be defaulted on if the home’s taxes are not paid, the home is not well maintained (has fallen into disrepair), the homeowner fails to keep up with their insurance payments and/or the money borrowed via the annuity is not repaid.
There are pros and cons to obtaining a reverse mortgage. For the right person and under the right circumstances, a reverse annuity mortgage can be a good thing.