Reverse Annuity Mortgage

A reverse annuity mortgage (RAM) is a type of loan designed for older homeowners, typically aged 62 or older, that allows them to convert part of the value of their home into cash without having to sell the home or make monthly mortgage payments. The value of the home that can be converted is what we call 'equity. ' Here are the key points to remember:

1. Eligibility: Usually available to homeowners 62 years or older with a significant amount of their home's value paid off. For instance, if your home is worth $ 300,000 and you've paid off $ 200,000, you have significant equity.
2. Your Control: With a RAM, you're in the driver's seat. You have the flexibility to receive payments from the lender in a way that best suits your needs. Whether it's a lump sum, monthly payments, a line of credit, or a combination of these, the choice is yours. And the best part? You're not tied down to monthly repayments like with traditional mortgages. Instead, the borrower's loan balance increases over time as interest and fees accrue in relation to the unpaid loan balance.
3. Repayment: The loan needs to be repaid when the homeowner sells the home, moves or vacates the property, or passes away. The sale of the home typically covers the repayment.
4. Homeownership Retained: The homeowner retains the title and ownership of the home, ensuring they can live there as long as they wish, provided they continue other obligations, such as paying insurance, taxes and maintenace of the property.
5. Financial Security: Most reverse annuity mortgages are non-recourse loans, providing a safety net for you and your heirs. This means that you should never owe more than the home's value, however, this is not always the case, if the lender does not continue to keep the valuation updated.