Definition of Reverse-Annuity Mortgage (RAM)

loan under which the owner of a home receives the equity in the form of a series of monthly income payments for life. Upon the owner's death, the lender institution (usually a bank) gains title to the home and is free to keep or sell it. The longer that monthly income payments are made, the greater the reduction in the owner's equity in his or her home. This type of mortgage is of value to older individuals who own their homes free and clear. Their large equity enables them to continue to live there and to receive a monthly income benefit.