Reverse annuity mortgage - pros and cons of a ram loan
For a senior aged 62 or older who is in need of some financial assistance, a reverse annuity mortgage, or RAM, might be just the thing to help out. A RAM is a way for seniors who have homes that are paid off to live of the equity in their home and use the money for medical costs.
Any senior who choose can use the money for medical costs and no repayment is necessary until they pass away at which time the bank will become the owner of the property.
As with any type of financial transaction, it's vitally important that you take all variables into consideration before you sign on the dotted line. This is a complex financial instrument and not something to be entered into lightly.
Here are some pros and cons of getting a reverse annuity mortgage:
PROS
1. The biggest pro to this type of loan is that it offers the home owners peace of mind. The money you get from your loan can be used to take a vacation, help out the kids, fix up your home, or for unexpected medical expenses. With so many retirement funds losing value these days, many people are finding themselves short of their expected levels. A RAM can help meet some of these expenses.
2. There is no income or credit criteria that needs to be met as long as the homeowner has a lot of equity in their home and is at least 62 years old.
3. Since this money is from your home that you have completely paid off or nearly so, the RAM is tax free. You also do not have to worry that the loan amount will be greater than the value of your home when it comes time to pay off the loan. If that happens the difference will be paid by the U.S. Department of Housing.
CONS
1. The initial costs are very high when compared to a traditional mortgage. Closing costs and interest rates will be much higher so make sure you take that all into consideration first.
2. If you borrow too young in life and you live a long time, your payments and interest could eat up all the equity in your home. You can only go to this particular well once, so hold off as long as you can.
3. Your heirs will have to deal with the sale of the house once you pass away and that is yet another consideration. You should consult with them and make sure they are able and willing to take on this responsibility.
If you are a senior who finds themselves in need of some extra money then a reverse annuity mortgage may be the way to go. Remember that it is not without it's downfalls and there are other options that may work as well, or even better for you and your needs. Just take your time, shop around, ask a lot of questions so that you can make the best choice for you.
TAGS: reverse annuity mortgage, RAM closing cost
Article Source: Messaggiamo.Com
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