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What are Reverse annuity mortgages?

Posted on: 08th Nov, 2005 03:10 am
Reverse annuity mortgage (RAM) is a mortgage loan program designed specially for senior citizens. It allows them to borrow a certain amount against their home equity. The borrower receives monthly tax-free payments from the lender either in the form of periodic payments or from an annuity set up with the loan proceeds.

The borrower does not have to repay the loan till he sells off the property or if he wishes to move over to another place. In case he dies, his heirs will have to repay the principal balance along with the interest.

Reverse annuity mortgage is also known as reverse mortgage. The Home Equity Conversion Mortgage (HECM) is a special kind of reverse annuity mortgage approved by the US Department of Housing and Development (HUD).

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Hi Caron,

Let me provide some more inputs about Home Equity Conversion Mortgages.

To pay for HECM, there are two MIPs (Mortgage Insurance Premiums) which are collected-
  • An up front premium which can be financed by the lender amounting to 2% of the value of the home and
  • A monthly premium, the amount for which equals 0.5% per year value of the mortgage balance.
Also, the loan origination charges by any lender can vary, but the amount out of such charges that can be financed through HECM is limited to a maximum limit of $1,800.

The fees for appraisal and inspection set by HUD can be charged from borrowers but they are allowed to get finance for these charges also.

Posted on: 21st Dec, 2006 03:55 pm
how can I apply for hecm
Posted on: 20th Jan, 2007 11:04 am
Hi Vince,

Welcome to Mortgagefit forum.

If you fulfill the eligibility criteria for HECM then you should send your application through any FHA-approved lender. The lender then submits the your application for approval to the HUD Field Office in your region.

To know about the lenders who are approved by FHA then you can search the HUD listing:

Posted on: 20th Jan, 2007 11:16 am
Hi Vince,

Welcome to our forums.

You can apply to an FHA approved lender for an HECM.

Our Community also has a group of lenders offering different types of loan programs. If you are interested to apply for an HECM, you may Request us for free consultation. As soon as we receive your request with the minimum details on your loan requirements, we shall froward it to our Community lenders. The lenders may conatct you if their profile matches with your reuqirements.


Posted on: 22nd Jan, 2007 04:48 am
Is it safer with a fixed annuity or a variable rate?
Posted on: 27th Aug, 2009 02:20 pm
it allows an elderly person to live off the equity in a fully paid-for house. Such a homeowner would enter into a reverse annuity mortgage agreement with a financial institution such as a bank, which would guarantee a lifelong fixed monthly income in return for gradually giving up ownership of the house. The longer the payments continue, the less equity the elderly owner would retain. At the owner's death the bank gains title to the real estate, which it can sell to offset outstanding claims.
Posted on: 28th Aug, 2009 06:00 am
Reverse Annuity Mortgage (RAM) is a loan borrowed against the value of one's home. In this situation, the lender gives the borrower the amount of the loan and the borrower makes no payments and retains title to his/her home. When the borrower moves from the house or dies, the lender takes possession of the home, which it then sells to repay the loan. Any extra profit is remitted to the borrower or his/her estate. A lifetime reverse mortgage allows a homeowner to access his/her home's equity without the inconvenience of moving. It is a financial instrument designed to help homeowners who are cash poor, and is limited to senior citizens. In the United States, one must be 62 years old in order to be eligible for a lifetime reverse mortgage, while the U.K. requires potential borrowers to be at least 55. It is also known as a lifetime reverse mortgage.
Posted on: 30th Oct, 2012 12:00 am
This definitely gives the best explanation about this scheme. People should be aware to take help of such programs and advisers should promote these too.
Posted on: 02nd Nov, 2012 10:33 pm
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