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In a fixed-term, level-payment reverse mortgage, sometimes called a reverse annuity mortgage, or RAM, a lender...

In a fixed-term, level-payment reverse mortgage, sometimes called a reverse annuity mortgage, or RAM, a lender agrees to pay the homeowner a monthly payment, or annuity, and expects to be repaid from the homeowner's equity when he or she sells the home or obtains other financing to pay off the RAM. Consider a household that owns a $140,000 home free and clear of mortgage debt. The RAM lender agrees to a $100,000 RAM for 10 years at 6 percent. Assume payments are made monthly, at the end of each month to the homeowner.

Calculate the amount of the loan balance at the end of Year 9 represents principal.

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Answer #1

Monthly payment= $1,110.21

Principal outstanding at the end of year 9= $12,899.40

Calculation as below:

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