Mortgages come in many varieties and can be quite confusing. Reverse annuity mortgages have a confusing name but can be very helpful for seniors. A reverse annuity mortgage is one form of reverse mortgages in general. Reverse mortgages were created for seniors and you must be at least 62 years of age at time of application.
A reverse mortgage is a variation of a home equity loan. Normal home equity loans require payments made monthly towards the balance of the loan taken out. If the payments are not made, then the home is subject to foreclosure. For this reason, it can be very dangerous for seniors to take out normal home equity loans. Fixed incomes might not keep up with increasing home equity interest rates.
With a reverse mortgage there are no payments due on the loan balance until one of three things happen. The first is if the house is sold. If sold, the reverse mortgage balance must be paid off first with the home sale proceeds. The second event would be if the borrower no longer occupied the home. An example would be going into a retirement home. The final instance is the death of the borrower.
There are two different ways that money can be received from a reverse mortgage. The first is a lump sum. This means the entire amount of the loan is given to the borrower at closing. The other type is a reverse mortgage with an annuity. This means that instead of a lump sum the borrower receives a stream of payments every month until one of the above 3 events happen.
The amount that can be borrowed is related to various criteria. More money can be taken out the older the borrower is. Also, the more the appraisal is for the property translates to more able to be borrowed using a reverse mortgage. There are other variables that relate to the locality in which you live. Resources are available which can help you figure out the amount you can secure with a reverse mortgage.
One excellent source of information is actually mandatory. It is required that all borrowers with reverse mortgages attend a free education class approved by HUD. This is ensure seniors to not get taken advantage of by bad lenders. These classes are an excellent source of information and are a good benefit to seniors. An educated borrower can often save money.
The decision on whether to take a lump sum or an annuity relates to several factors. Your age and your income needs are primary criteria. Oftentimes, the advice of a certified financial professional becomes very useful when making this decision. Each person's situation is unique and there is no one size fits all answer. Your situation must be analyzed individually.
Reverse annuity mortgages can provide seniors with a monthly check without fear of losing their home. They often are a better choice than a typical home equity loan. As with any major financial endeavor, information is essential. Make sure you understand all the terms before signing on the bottom line.
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