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Sep 22, 2012

Reverse Mortgage to purchase an annuity


Category: General
Posted by: admin

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Reverse mortgages seem to answer the mortgage questions and answers of a majority of the seniors in the United States. Lots of improvements have been noticed in the financial condition of the seniors living in this country, thanks to the reverse mortgages. Qualified homeowners will be able to manage the equity in their homes in order to receive cash. The money they receive can be used to meet their monthly expenses as well as other long term financial needs. Well, just when there are people thinking about using cash they receive with the help of reverse mortgages to meet their long term financial needs, there are many who are contemplating an annuity purchase. Well, it is really important for them to know that purchasing an annuity is going to prove risky for the senior citizens.

Annuity

An annuity is a product that is generally sold by an insurance company. It is designed to make sure the recipients are furnished with future monthly payments. This makes it quite obvious why a majority of the senior citizens who have reverse mortgages tend to go for an annuity. They have hopes of having an extra source of income that could help them during their retirement years. Also there are chances of receiving payments that are higher than the reverse mortgages in general. It is very important that you consider some additional factors before you apply and get an annuity for yourself.

Factors to be considered

It is important for the people of this country to rethink their decision about debt arrangements. Entering into a couple of debt arrangements such as an annuity and a reverse mortgage will cost you more than what reverse mortgage alone would have cost you. It is important to note that addition of an annuity to a reverse mortgage will put the burden of debt immediately upon your shoulders. There are no such risks involved in reverse mortgages. The debt amount increases gradually over a period of time. A gradual increase in the debt amount happens provided the homeowner opts for periodic payments instead of a lump sum.

Further, you’ll have to deal with high expenses in the form of interest with such an immediate debt on your shoulders. This wouldn’t have happened had the money been distributed in the form of reverse mortgage loan advances. The annuities are also based on fixed monthly payments for an indefinite period. On the other hand, you get to reap the benefits of flexibility that comes with the reverse mortgages. You can always alter the frequency of your payments as per your needs and requirements.

To purchase an Annuity or to Avoid purchasing an annuity

Keeping in mind the shortfalls, it is always wise that you don’t use the money from your reverse mortgage to buy annuity. You should remember the fact that the advantages of annuity are always available in a reverse mortgage. The best thing about a reverse mortgage is that it allows you to take advantage of variable payment options. There’s also the stability assurance as given by the federal government, which you’re unlikely to find in the annuities.