How a Reverse Annuity Mortgage Works
A reverse annuity mortgage is a loan that is used to pay tax free immediate withdrawal proceeds. The term reverse annuity mortgage, or RAG, is often mis-used. Because the proceeds from reverse annuity mortgages are not taxable, the tax-free lump sum can be used for many purposes such as purchasing a home or saving for retirement. Some people mistakenly think that this type of loan is considered a poor investment when in reality it can be an asset with significant tax benefit. Here is a look at what is required in order to qualify for a reverse annuity mortgage and what the money can be used for.
Before getting started it is important to understand that in order to take advantage of a reverse annuity mortgage, you will need a mortgage company with a decent market reputation. You may want to look at several companies before choosing one. They all have different terms and conditions but are all very straight forward. In fact, if you get prequalified and found to be eligible, it is quite easy to sign a contract.
Another thing that you should know is that you will not have to worry about the lender paying your income taxes. This type of loan will be treated like any other investment. The interest will be tax deductible to you. Depending on how high the interest rate is, the amount can be large. It will depend on the age of the loan and the current state of the nation’s economy.
If you are still employed at the time you take out the loan, you can use your previous salary as the down payment. If you have just stopped working the previous employer may offer to make the down payment for you instead. This will help you qualify much faster. Usually the down payment that you make is half of what you would normally pay if you were saving towards the loan.
You may also qualify for a no doc loan. This is where you do not need to prove any sort of income or assets in order to qualify. Your account and income will be checked with the Internal Revenue Service. This allows the mortgage company to provide you with the money that you need, even if you do not have any. They can reduce the interest on the loan, to save themselves some money too.
If you are looking for a no documentation mortgage you will want to shop around. There are many lenders out there who want your business. With so many choices you are sure to find one to meet your needs. Make sure to compare interest rates as well as the terms of the loan. Many people believe that they are getting the best deal on this type of loan but that is not always the case.
To be able to own a home, you have to prove to the lender that you have an income that will cover the mortgage payments. This is why you can get a reverse annuity mortgage if you have a fixed income source like a regular job. It will not matter what your salary is because it will be enough to make the payments.
If you have to prove that you are employed you will need to provide some kind of proof. This could be an ID card from your job, pay stubs, copies of tax returns or social security cards. No matter how you get the proof you are going to have to provide it for your reverse annuity mortgage. This can take a little time but the time and effort will be worth it in the long run.