The most popular form of equity advance for retired persons is the Reverse Annuity Mortgage (RAM). The lender will advance the loan to the homeowner (borrower) monthly and will pay the borrower over several years. With every payment made, the outstanding balance on the mortgage for the property increases. Part of the equity advance goes to the lender to pay the interest on the entire loan and the rest goes to the homeowner (borrower). Over time, as the mortgage loan gets larger, the net check sent to the borrower decreases as the interest payment takes more of the monthly disbursement.

The loan is usually repaid in three ways:

• The borrower dies and the loan is settled by the estate.

• The property is sold.

• A new appraisal is done to increase your borrowing power after the maximum loan amount is reached.

A WORD OF WARNING: These loans are not permitted in all states (such as Texas) and are of some risk. Study all your options very carefully.