What the Heck Is an Annuity Reverse Mortgage?
Annuity Reverse Mortgage
That's exactly what I said when a friend told me that her elderly father had gotten an annuity reverse mortgage because he needed the added financial assistance on a monthly basis to help pay for medical care costs.
I found out it’s also known as a reverse annuity mortgage, defining a situation where an elderly homeowner is able to take out a long-term loan for payments or a ‘line of credit’ against the equity that has built up as collateral in the home.
So how is an annuity reverse mortgage different from a regular reverse mortgage? That's another question I had. I did some digging and found out that a reverse annuity mortgage is the same thing as a reverse mortgage, or even a home equity conversion mortgage. Nothing like making it complicated with different terminology!
In a nutshell, a reverse annuity mortgage is a type of mortgage where someone who is over 62 years of age can borrow against the equity that has built up in their home. They can opt for a lump sum cash payment, a credit line, or receive a monthly ‘allowance/stipend/annuity’ depending on the terms of the loan.
The homeowner maintains ownership of the home. This should not be confused with a home equity line of credit or a home equity loan, but simply as another way to enhance monthly income. Keep in mind that in order to qualify for this type of mortgage, the house must not have any liens against it, or a mortgage.
Not all annuity reverse mortgages are the same, so if you're interested, talk to your banker or even your accountant about the different types and options you may have.