What is the Difference between Annuity and Mortgage Payments

Many people ask what is the difference between annuity and mortgage payments. At first glance, you would think that there is a huge difference between an annuity and a mortgage payment. However, nowadays, the concept of an annuity has been adopted in the reverse mortgage market so you have to examine more closely to see the difference between an annuity and mortgage payments.

What is a reverse annuity mortgage?

First of all, let's define what a reverse annuity mortgage is. A reverse annuity mortgage is an arrangement in which a homeowner borrows against the equity in his or her home and receives regular monthly tax-free payments from the lender. The reverse annuity mortgage is sometimes just called the reverse mortgage or home equity conversion mortgage.

What is an annuity as in the reverse mortgage annuity?

An annuity is a periodic payment that will begin at a specified or contingent date and will continue throughout a fixed period or for the duration of a designated life or lives.

In the reverse annuity mortgage case, the annuity is the monthly payments that the lender gives the homeowner. The reverse mortgage does not have to be paid back so it is only available to seniors. The lender takes possession of the home upon the death of the homeowner.

What is a mortgage payment?

A mortgage payment is the monthly payment that the homeowner pays back to the lender for lending a lump sum amount of money. A mortgage payment is the regular payment that any homeowner that borrows money from the lender needs to pay back.