A mortgage that involves a bank or lending institution extending a loan (usually, a long-term loan) for an amount equal to a percentage of the appraisal value of the underlying residential unit. The loan is then paid to the owner of unit in the form of an annuity. This type of loan allows owners (e.g., homeowners) to tap into the equity in their ownership without having to sell it.

A borrower can turn its home equity into money (borrowed funds) without having to make monthly mortgage payments under a standard or straight mortgage. The annuity is set up from the reverse mortgage loan proceeds.

Under this type of mortgage loan, lender makes periodic payments (annuity amounts) to the borrower. The borrower’s home equity is used as security for the loan. A reverse annuity mortgage allows the homeowner to receive a stream of monthly payments or have a line of credit from a mortgage lender (mortgagee).

It is known for a reverse mortgage or for short as RAM.