Reverse Annuity Mortgage - A Necessity Between You and Your Home Owner

By Robert C Eldridge Jr

A Reverse annuity Mortgage is an arrangement where a home owner borrows against the equity in his home and receives a regular monthly tax free payment from the lender. It is also known as home equity conversion mortgage (HECM), or reverse mortgage. Here an elderly borrower like 62 or above can borrow against the equity for his home to receive a monthly payment. He might also choose to receive a lump sum amount. The homeowner can defer his repayment of the loan until his death, the home is sold or the owner leaves into aged care.

The home owner makes a monthly amortized payment to the lender in the conventional mortgage. The equity increases after each payment within his property. Typically after the term of the decided period e.g. the mortgage is paid in full and the property gets free from the lender. In a reverse mortgage the homeowner need not pay any anything and all interest is added to the lien of the property. A lien is a type of security interest granted by law over an item of property to secure debt payments. A person, who grants the lien is the owner of the property, is called as linear and the person who has the benefit of the lien is the lienee. The debt on the property increases each month in case the owner receives monthly payments or a wholesome payment of the available equity percentage of their age.

Requirements

To borrow the reverse mortgage in US the borrower must be at least 62 years of age. No minimum income or credit requirements are there to be fulfilled but there are some other requirements to be fulfilled. Before they invest time and money into the process the investor must ensure that he qualifies for the reverse mortgage. Most of the reverse mortgages allow the usage of money for any purpose. However, a pending bankruptcy can slow the process of reverse mortgage. Mobile homes need to have special requirements, whereas some types of dwellings are not approved for reverse mortgage.

Reverse Mortgage Proceeds-

The amount of money available to the borrower depends on the five important factors.

· The value of the house is determined by the condition of the house, whether any repairs is required on the house.

· The interest rate determined by the U.S. treasury 1 year T- Bill, the LIBOR index or 1 year CMT.

· It depends on the age of the senior, older the age more the money.

· Mode of the payment needs to be decided, line of credit, lump sum or monthly.

· The value of the property will be determined and whether the value is more than the national loan limit set by HUD.

When the Loan Ends:

The loan comes to an end with the death of the home owner, selling of the house or depending on the loan conditions. In case of the death of the owner the property can be refinanced by the homeowner’s heirs.

Visit http://www.annuitycampus.com for more annuity tips and tricks.

Robert holds over a decade of experience as a multiline agent in multiple states and currently serves on the membership council of the National Association of Insurance and Financial Advisors.

Photo by Quinn Dombrowski

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