What Is a Reverse Annuity Mortgage? Monthly Income vs. an Annuity

A reverse annuity mortgage is an older name for a reverse mortgage that pays you a monthly amount instead of one lump sum. It is not a separate product you can apply for today, and despite the name, no insurance annuity is involved. On today's FHA-insured HECM, the monthly version is called the tenure payment option: equal monthly advances that continue for as long as the loan stays in good standing and you keep living in the home.

When a Bend homeowner asks me about a reverse annuity mortgage, the real question underneath is almost always the same: can my house pay me every month, the way a pension would? It can, with conditions. The second question, which usually comes from someone else, is whether to take the money out in one piece and buy an annuity with it. That one deserves a slower answer, and federal law has already weighed in on it.

What Is a Reverse Annuity Mortgage? Where the Name Comes From

The term survives in federal rules. The Consumer Financial Protection Bureau's official commentary to the Truth in Lending rules, Regulation Z (comment 17(c)(1)-14), still opens its section on these loans with "Reverse mortgages, also known as reverse annuity or home equity conversion mortgages," and describes them as loans that "typically involve the disbursement of monthly advances to the consumer for a fixed period or until the occurrence of an event such as the consumer's death."

That is the whole idea behind the name. The word "annuity" describes the shape of the money, a steady monthly stream, not the source. The payments come from a loan secured by your home, interest accrues on what you receive, and the balance is repaid when the loan ends. HUD's current HECM rules in 24 CFR part 206 do not use the reverse annuity mortgage label at all. They call the monthly options tenure and term, and that is the language you will see on any loan estimate or counseling certificate today.

So if you have read an older article, a textbook, or a relative's paperwork that mentions a reverse annuity mortgage, translate it as "a reverse mortgage paid out monthly." Everything that applies to a reverse mortgage applies to it, including the obligations listed further down this page. For the basics of the loan itself, start with what a HECM is.

How a Reverse Annuity Mortgage Pays You Today: Tenure and Term

Federal rule, 24 CFR 206.19, lists the ways a HECM can pay out. Two of them are the modern reverse annuity mortgage:

• Tenure payments. Equal monthly payments that continue until the loan becomes due and payable. Under 24 CFR 206.25(f), the amount is calculated as if the payments would run until the youngest borrower turns 100 (with age capped at 95 for the math), so a 70-year-old's payment is figured over 360 months. The payments do not stop at 100. They stop when the loan comes due.
• Term payments. Equal monthly payments for a number of months you choose. A shorter term means a larger check, and when the term ends, the payments end, but the loan does not come due just because the term is over.

Either one can be paired with a line of credit (modified tenure or modified term), and on an adjustable-rate HECM you can change plans later. All of the payout options, including the line of credit and the lump sum, are compared side by side on home equity retirement income, so I will not repeat that rundown here. Two details matter specifically for anyone who wants a reverse annuity mortgage:

1. Monthly payments come only on an adjustable-rate HECM. Under 206.19(e), the fixed-rate HECM offers a single lump sum at closing and nothing after. If someone quotes you a fixed rate and a monthly check on the same HECM, ask them to explain.
2. "For life" really means "while the loan is in good standing." Tenure payments stop when the loan becomes due: when the last borrower dies, sells, or moves out, or if the property taxes, insurance, or upkeep fall behind and the loan is called due. One more case catches couples off guard. If a spouse is an eligible non-borrowing spouse, 206.25(f)(1) says the monthly payments stop at the borrower's death, even though the spouse may be able to stay in the home. Who can stay, and for how long, is covered on what happens to a reverse mortgage when you die.

How large the monthly amount can be depends on your age, your home's value, and the expected interest rate, which together set your principal limit. How much you can borrow on a reverse mortgage walks through HUD's table.

Tenure Payments vs. Buying an Annuity With a Lump Sum

Here is where the two meanings of "annuity" collide. A tenure payment is a loan advance. A commercial annuity is an insurance contract you buy. Some people are told to take a reverse mortgage in one piece and buy an annuity with it, and on paper the two can look alike, since both send a monthly check. Underneath, they work very differently.

A Bend example shows why the lump-sum route loses ground before the first annuity check arrives. Take a $750,000 home and a 70-year-old borrower. At a 6.0 percent expected rate, HUD's principal limit table allows 41.5 percent, about $311,250. Taken as monthly tenure payments, what is left of that principal limit after closing costs is spread across the monthly checks, and interest builds only as each check is paid.

To buy an annuity, you would need the money in one piece, which means a fixed-rate HECM. HUD caps what you can take at closing at the greater of 60 percent of the principal limit or your mandatory obligations plus 10 percent. With no existing mortgage, that is about $186,750 in this example, and closing costs come out of it. A fixed-rate HECM has no later draws, so the rest of the principal limit is simply not used. Then interest and annual mortgage insurance start compounding on the full $186,750 on day one, while the annuity pays it back to you a little at a time. You are paying interest on money that is sitting with an insurance company.

The annuity does have one real difference: its payments can continue after you leave the home, while tenure payments cannot. If that is the problem you are trying to solve, it deserves an honest comparison with a HUD counselor and an advisor who earns nothing from the annuity, not a one-stop pitch.

The Reverse Annuity Mortgage Trap: What Federal Law Says

The HECM statute, 12 U.S.C. 1715z-20, addresses annuity sales directly in three places:

1. No one can make you buy one. Subsection (o) says a borrower "shall not be required by the mortgagee or any other party to purchase an insurance, annuity, or other similar product" as a condition of getting a HECM. Title, hazard, and flood insurance are the customary exceptions.
2. Your loan officer is walled off from selling one. Subsection (n) requires the lender and anyone involved in originating the loan either to stay out of other financial and insurance activity, or to keep firewalls in place so the people originating your HECM have "no involvement with, or incentive to provide" you any other financial or insurance product.
3. Your counselor cannot be tied to annuity sales. Subsection (d)(2)(B)(iii) requires HECM counseling from someone who is not associated with or paid by anyone involved in "the sale of annuities, investments, long-term care insurance, or any other type of financial or insurance product." HUD repeats that in its definition of a HECM counselor at 24 CFR 206.3. See reverse mortgage counseling for how the session works.

A fourth protection reaches every reverse mortgage, HECM or proprietary. Under Regulation Z, the lender must give you a total annual loan cost disclosure, and the CFPB's commentary (comment 33(c)(1)-2) says that if the lender offers, arranges, helps you buy, or knows you are buying an annuity as part of the transaction, the annuity's cost has to be counted in that disclosure. The cost of the annuity does not get to hide outside the loan paperwork.

Put plainly: if the same conversation includes both a reverse mortgage and an annuity, slow down. The pattern behind these pitches, and where to report one, is on reverse mortgage scams and red flags. How to vet the lender itself is on how to spot the worst reverse mortgage companies.

Who a Reverse Annuity Mortgage Fits, and Who It Does Not

A monthly reverse mortgage plan works well for a fairly specific person, and I would rather tell you up front if you are not that person.

It tends to fit a homeowner who plans to stay put for the long run, has a steady monthly shortfall between income and expenses, and can comfortably keep up property taxes, insurance, and maintenance. A single homeowner in their seventies whose Social Security does not quite cover the budget is the classic case. A modified tenure plan, with a smaller monthly check plus a line of credit held in reserve, is often the more flexible version of the same idea.

It tends not to fit someone who expects to move within a few years, whose health makes a move to assisted living likely, or who would struggle with the property charges, since falling behind can end the payments and bring the loan due. The ways a reverse mortgage can come due are laid out on can you lose your home with a reverse mortgage. If your heirs hope to keep the house, read reverse mortgage heirs before choosing a payout plan, because every monthly check adds to the loan balance.

If you are still deciding whether a reverse mortgage belongs in your plan at all, is a reverse mortgage a good idea is the place to start.

What Every Reverse Mortgage Requires of You

Whatever name it goes by, every FHA-insured HECM carries these terms, because they come from HUD rather than from any lender:

• Age. Borrowers must be 62 years of age or older to qualify for a HECM. Certain proprietary reverse mortgage products may be available to borrowers as young as 55, depending on the state and program. The details are on reverse mortgage age requirements.
• You keep the title. With a reverse mortgage you keep the title to and ownership of your home.
• Ongoing obligations. You remain responsible for paying property taxes, homeowners insurance, and any HOA dues; for maintaining the home; and for occupying it as your primary residence. Failure to meet these obligations may cause the loan to become due and payable.
• Non-recourse. A HECM is a non-recourse loan, so you or your heirs will never owe more than the home is worth at the time the loan is repaid.
• Counseling. Before obtaining a HECM, all borrowers must complete a counseling session with a HUD-approved reverse mortgage counselor.

A reverse mortgage is a home-secured loan that must be repaid. Monthly payments from it are loan proceeds rather than income, so they are generally not treated as taxable income, though you should confirm your own situation, including any effect on need-based benefits, with a tax or benefits advisor. The tax and benefits picture is covered on home equity retirement income.

A Reverse Annuity Mortgage in Bend and Central Oregon

Central Oregon is a place where the monthly version makes particular sense. About 21.8 percent of Deschutes County residents are 65 or older, and many of them own homes worth far more than their monthly retirement income would suggest. The Beacon Report's August 2026 figures put the median single-family sale in Bend at about $721,000, with Sisters near $682,000 and Sunriver near $973,000. That is a lot of value sitting still while the budget runs tight. How those values translate into reverse mortgage proceeds, town by town, is on Central Oregon home values and reverse mortgages.

Brian Albrich meets homeowners at 601 NW Harmon Blvd in Bend and across Redmond, Sunriver, Sisters, La Pine, and Prineville. If someone has suggested a reverse annuity mortgage to you, or suggested pairing a reverse mortgage with an annuity, bring the paperwork and we will look at it together. The Bend reverse mortgage guide covers the local picture in more depth.

Reverse Annuity Mortgage: Frequently Asked Questions