A lot of people consider a reverse annuity mortgage as the approach retirement as an additional source of income. A lot of adult children also consider reverse annuity mortgages for their parents once the parents reach the final few years of their lives. There are several stipulations on the reverse annuity mortgage and a more than a few conditions that need to be met before the mortgage can be realized.
Some Reverse Annuity Mortgage Conditions:
The annuity will never exceed the value of the home itself.
You continue to own the home through the mortgage payout.
The annuity recipient receives slow payments of the equity of the home over time.
You must own the home outright without any additional liens or mortgages.
There will be fees to pay to get the annuity started just like closing and financing a home loan.
The reverse annuity mortgage will NOT affects your social security or medicare benefit payouts.
You can protect other assets and children’s inheritance through a ‘no-recourse’ policy that prevents the bank from seeking other resources should something happen to the value of the home.
You must be older than 62 to do a reverse annuity mortgage.
So is it a good idea for me and my family?
That can be a difficult question to answer because everyone’s financial and family relationships are different. If we consider what the annuity will do that may help you determine whether or not it is something that is in the best interest of your family. First the reverse mortgage is going to drain the equity out of your home. So suppose you own a home that is now worth $250,000, and you are in your mid to late 60′s. Assuming you will live to age 80 you would want to make sure you got payments monthly for 20 years. So lets do a little math.
20 years (*) 12 months per year is 240 months that you will need to receive a payment. $250,000 divided by 240 months means you will receive a little over $1,000 per month. At the end of those 20 years you will no longer own your home, the annuity company will. Now some reverse mortgage’s will allow you to stay in the home until you pass away, but not many.
So you are exchanging the equity in your home for $1,000 per month. The only way to determine for sure whether the reverse annuity mortgage benefited you for sure would be to ask your self how valuable the additional $1,000 per month was to your monthly income. If it makes the difference between having the necessary medications and money to live on then it will be a good thing to do. However, if all you are doing with it is spending it on your grandkids then you may be in trouble at the end of the annuity.
