Reverse Mortgage News

Be A Little Less Sheepish About Reverse Annuity Mortgages

April 1 , 2008

By Malcolm Berko of the Daily Journal

Dear Mr. Berko: We're retired and don't have enough income to meet our living expenses, especially real estate taxes, home insurance costs, food, medical and upkeep, which seems to be increasing every year. Please tell me about a reverse annuity mortgage. Like, what do they cost? Do we have to pay off our current low mortgage? Are they very expensive? What happens to the equity when we pass on? Can we lose our home? And who should we contact in order to make applications?

F.D., Gainesville, Fla.

Dear F.D.: I'm fortunate to have a wonderful, robust 82-year-old lady friend (she voted for Harry Truman) who recently retired after 47 years in business. This beautiful, brilliant, blue-eyed, businesswoman owned a real estate firm, a mortgage brokerage business and a title company, all of which she sold in late 2005. Without a doubt, this classy lady probably knows more about reverse annuity mortgages (RAMs) than the combined knowledge of any dozen doyen with whom you might consult. She and her 64-year-old second husband of 23 years were spending a week in Boca Raton to collect a dinner debt on a bet I lost last November.

Anyhow, I showed her your letter and she said, "I'll have my great-grandson fax you our 'Dozen Most Frequently Asked Questions on RAMs.'" He did and here's their response to your questions.

1. Can I lose my home and remaining equity to the bank?

No! A RAM is a lien on your residence, which you still own. When you vacate (for what ever reasons) the loan balance is repaid in full and the remaining equity passes to you or your children.

2. Can a RAM use all the equity in my home so there will be nothing left for my children?

That's a statistical possibility but certainly not a probability. Considering today's home values and the actuarial tables used by the bank it's likely that your equity will increase in the years ahead.

3. Would it be better to sell my home rather than do a RAM?
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