Ask a Care Manager: What you should know about RAMs
Solicitations come in the mail talking about free money. Of course, no such thing exists but it’s the enticement of not having to worry about the increasing expenses that may make it attractive to older adults who want to be in charge of their lives and remain at home. The following questions/answers discuss the possibility of applying for a reverse annuity mortgage to access a stream of funds accruing from equity in a person’s home.
My husband and I own our own home and even though we’re getting older, we’d like to stay here. We are considering a reverse annuity mortgage but wonder if that’s a good idea. What can you tell us about a reverse mortgage?
Sometimes called a RAM, a reverse annuity mortgage is a home loan that utilizes your home equity into payments to you. It is different from a traditional mortgage in that you don’t have to make payments on this loan as long as you’re still living in the home. When you move out of your home and/or sell the house, the loan comes due.
How do I qualify for a reverse annuity mortgage?
If you are 65 or older, have equity in your home, own a single family home or a 1- to 4-unit home and you live in one unit, you are eligible. Condominiums and manufactured homes that meet FHA requirements also are eligible.
Is a reverse annuity mortgage the same as a home equity loan?
No, a reverse mortgage pays you where a home equity loan requires monthly payments to repay the loan. With a reverse mortgage the loan does not come due until the home is no longer your primary residence. Also, there are no income qualifications or credit score necessary with a RAM.
If we decide to apply for a RAM, will there be an estate to leave to our children?
When the home is sold or the owner(s) pass away, the estate must pay back the cash you received during the reverse mortgage period plus interest and other fees. Any remaining funds belong to your heirs.
Who should I talk to regarding a reverse annuity mortgage?
You can get this information from FHA-approved lenders such as your bank or local lending institution free or for a very low cost. (800) 569-4287 is the toll free number for HUD Counseling and Referral. Once approved for a reverse mortgage, there are some upfront fees that must be paid to the lending institution.
Can the bank take my home if I outlive the loan?
No, as long as one of the borrowers still lives in the house, the loan does not come due. You can never owe more on the loan than the house is worth when it is sold.
How can I get money once we’re approved for a RAM?
There are several options for getting your money. You should consider what you need the money for: a one time remodel or monthly payments for in-home care. You also want to make sure that this money won’t affect your eligibility for public benefits such as Medi-Cal, SSI or In-Home Supportive Services. If this is a consideration, talk with your eligibility worker before you decide on a RAM.
Have a question for Ask a Care Manager? Send to firstname.lastname@example.org. Carol S. Heape, MSW, CMC is CEO, Elder Options, Inc. serving the Sacramento Region, Placerville & So. Lake Tahoe. www.elderoptionsca.com.
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