A reverse annuity mortgage is a loan product that allows eligible homeowners, typically seniors, to borrow against accumulated home equity, receiving funds as a lump sum, line of credit or periodic payments without making monthly mortgage payments during the loan term.
The Home Equity Conversion Mortgage (HECM) is the most widely known and federally insured version of this product. In valuation, accurate appraisal of the subject property is critical, as loan proceeds are directly tied to appraised value and the borrower's age. Property conditions and eligibility requirements must be carefully evaluated, as deficiencies can limit available proceeds or require repairs prior to closing.
Loan originators should ensure borrowers understand that the loan balance increases over time as interest accrues, with repayment deferred until the home is sold, vacated or transferred.