80 20 Home loan

Most people who take on an 80 20 home loan are normally young specialists. Hsieh further describe that these are” people who have gotten out of college and have excellent jobs.” An 80 20 mortgage loan is for individuals who have good credit however do not have a great deal of savings to their name in order to pay for deposits of many houses.

The price of houses is progressively climbing. In order to buy a house, customers are turning increasingly to 100-percent funding and mortgage where home loan insurance coverage is not part of the deal.

The 80 20 mortgage loan is one such loan. With an 80 20 home mortgage loan, the house buyer actually takes out two loans.

According to Anthony Hsieh, president of HomeLoanCenter.com, an 80 20 mortgage loan” allows individuals to purchase without a deposit.” An 80 20 mortgage loan is likewise for people who would rather leave their savings alone in buying a home.

80 20 Mortgage Loans for Renters

80 20 home loan are also targeted to those people who are occupants or leasing homes. These types of people can pay for monthly rents, the costs which are roughly about the same as the cost of a house. Since their rent costs are a cycle, at the end of their month-to-month expenses, these individuals do not have actually enough funds conserved to be able to pay for a deposit.

These individuals might have the ability to borrow money on loan programs where little or no down payment is needed. To do so, they would have to offer a personal mortgage insurance coverage or PMI. If you want to avoid PMI, you can take an 80 20 mortgage loan.

With an 80 20 home loan, you get a “piggyback loan” or 2nd mortgage loan that is used to back up the first home mortgage. The first mortgage is consisted of 80 percent of the home’s price. The 2nd loan is only for 20 percent minus the down payment.

80 20 Mortgage Loans – Second Mortgage spells greater rates

For the most parts, the interest rate of the 2nd loan of an 80 20 mortgage loan is greater that initially. If you integrate the two payments in an 80 20 mortgage loan, you get lower expenses.

Others structure their 80 20 mortgage loans in a minor different way. 80 20 home loan have the 20 percent piggyback depending on the prime rate. The 80 percent of the 80 20 home loan can be a fixed rate, adjustable, or interest-only.

The 80 20 home mortgage loan is one such loan. With an 80 20 home mortgage loan, the house purchaser in fact takes out two loans. At the 2nd part of an 80 20 home mortgage loan is for 20 percent of the home’s cost. With an 80 20 home mortgage loan, you get a “piggyback loan” or second home mortgage loan that is utilized to back up the first mortgage. Some loaning business structure their 80 20 home mortgage loan with the very first loan having a 5/1 ARM payment.

You can see proof of this simply by comparing the expense of an 80 20 home loan with the expense of a routine loan with PMI. The 80 20 mortgage typically costs less monthly.

Some financing business structure their 80 20 mortgage loan with the very first loan having a 5/1 ARM payment. After the initial 5 years, the payment for the 80 20 home mortgage loan interest rates is adjusted each year.

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Should You Refinance

Refinance Home Equity Line Of Credit– Benefits Of Refinancing Home Equity Line Of Credit

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Summary:
Refinancing an existing home equity line of credit can save you money on interest charges. It will also help you establish a payment plan to help you get out of debt sooner. Another benefit to refinancing is that you can get better terms, avoiding extra fees associated with a line of credit.

Get Better Rates And Terms

Getting better rates and terms on your home equity line of credit is one of the chief benefits of refinancing. With a line of credit, you have a couple of …

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home equity refinance

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Refinancing an existing home equity line of credit can save you money on interest charges. It will also help you establish a payment plan to help you get out of debt sooner. Another benefit to refinancing is that you can get better terms, avoiding extra fees associated with a line of credit.

Get Better Rates And Terms

Getting better rates and terms on your home equity line of credit is one of the chief benefits of refinancing. With a line of credit, you have a couple of refinancing options. You can decide to refinance both your mortgage and line of credit. Overall this will provide you with a low rate, but don’t trade in your low rate first mortgage for a more expensive refinance home loan.

The other option is to just refinance your line of credit with a second mortgage. A second mortgage can offer lower rates, either fixed or adjustable.

Establish A Payment Plan

Refinancing a line of credit will help you establish a payment plan. Before you apply for refinancing, calculate how much you can afford in a monthly payment. This payment amount will give you an idea of what terms to choose.

Just remember that your interest charges will be smaller than what you are currently paying. Also, the shorter the loan, typically the lower the rates are.

Find Better Terms

Tired of paying fees for such things as having a below minimum balance with your line of credit? Then refinance for better terms. Most refi mortgages don’t have annual fees. While you will have to pay closing costs to process the loan, you don’t have to worry about keeping a balance or paying the account off early.

However, it does pay to check. So before you sign for your refi, ask about any fees included. Late fees should be expected. Early payment fees can usually be deleted from the contract by paying a fee upfront.

While refinancing can save you money, it is important to shop around for the right lender. Ask about their rates and terms. Request loan quotes and compare to other lenders. Time spent researching financing options is an investment that will pay off for years to come.

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New Rules for Reverse Mortgages

These once-suspect loans can be a useful source of cash in retirement.

New Rules!

Financial planners have long regarded reverse mortgages as an option of last resort for cash-strapped homeowners in retirement. The loans—which let you borrow against the value of your home but don’t require repayment while you’re still living in it—have had a reputation as costly, complex products that put your family at risk of losing your home.

The stigma has lessened lately. Thanks in part to new rules for these government-backed loans, experts such as economics Nobelist Robert Merton have endorsed them, especially as a source of emergency funds. “There’s a totally different way of thinking about these now,” says John Salter, a professor of personal financial planning at Texas Tech University.

Here’s what you need to know about a reverse mortgage.

Your age is a factor. Your loan, formally known as a Home Equity Conversion Mortgage, can amount to about 50% to 70% of your home’s value, depending on your age and other variables. The older you are and the more equity you have in the house, the more you can get. A 70-year-old in a $300,000 house, for example, might be able to borrow about $173,000 before subtracting upfront costs such as a mortgage insurance premium and any balance owed on a preexisting mortgage. (Estimate your borrowing limit at reversemortgage.org.)

You’ll have a safety net. You can take the money as a monthly payment, lump sum, or line of credit to tap as needed. Financial planners say the credit line is usually your best option. You’ll pay a floating rate on the withdrawn money, now around 4%—about the same as for a traditional home-equity line of credit. But unlike the case with a HELOC, your borrowing has no set time limit. Your lender can’t reduce your credit line; in fact, it will grow over time. “Maybe you’ll never use it, but if you have a financial shock or health care crisis, it’s there,” says Salter.
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Costs have dropped. While reverse mortgages are more expensive to set up—upwards of $5,000, vs. a few hundred dollars for a HELOC—they have come down in price. In 2013 the initial insurance premium was cut to 0.5% of a home’s value, down from 2.5%, provided you limit your borrowing in year one. That’s a saving of $6,000 on a $300,000 home.

Your spouse is protected. In the past, if only one spouse was listed as a borrower and that spouse either died or moved—say, to a nursing home—the reverse mortgage had to be repaid soon or the other spouse had to move out. A new rule, implemented last June, lets a nonborrowing spouse stay in the home as long as it’s still his or her primary residence. You have to be at least 62 to take out a reverse mortgage, so if your spouse is too young to be a borrower, now he or she can’t be kicked out.

All Copyright credits to time.com

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Time to Get a Reverse Mortgage in 2016?

 

Is it time to get a reverse mortgage? A reverse mortgage is a popular way for older homeowners to tap into their home equity to create an income stream, or to take care of large expenses. However, reverse mortgages aren’t well understood by many people, so here’s what you need to know about these loans, as well as their benefits and drawbacks.

What is a reverse mortgage?
A reverse mortgage is a type of loan where a lender makes payments to you in exchange for equity in your house — the exact opposite of how a traditional mortgage loan works.

Proceeds from a reverse mortgage can be received in several different forms:

  • A lump sum of cash
  • Monthly payments, for either a set time period or for as long as you own the home
  • A line of credit
  • Some combination of these three options

As the lender makes payments to the borrower, interest begins to accrue, as well as mortgage insurance that you’re responsible for. If you choose to take a lump sum, you’ll get a fixed interest rate — otherwise, your loan will be originated with a variable rate. Instead of making payments, as with other types of loans, a reverse mortgage is paid back when you sell your home, die, or vacate the property for more than 12 months.

The amount you can receive through a reverse mortgage depends on several factors, including your and your spouse’s age, current interest rates, and the value of your home (or your equity).

Finally, most reverse mortgages are “nonrecourse” loans, meaning that there is no other way for the lender to recoup the balance other than through the sale of the home. This means that the lender is not allowed to collect more than the sale price of the home to satisfy the debt — for example, if a borrower has an outstanding reverse mortgage balance of $400,000 upon their death and their home sells for $300,000, the lender cannot try to collect the additional $100,000 from the borrower’s estate.

Are you eligible?
In order to be eligible to receive a reverse mortgage, the following conditions must be met:

  • You are over 62 years old
  • Your home conforms to HUD standards — It must be a single-family home, two-to-four unit property, condo, townhouse, or a manufactured home built after June 1976. Co-ops and buildings with more than four housing units are not eligible.
  • You must have enough equity in your home to justify the reverse mortgage
  • The reverse mortgage lender must be the first lineholder on the property. In other words, if there is an existing mortgage on the home, it must be paid off with the proceeds from the reverse mortgage.

It’s also worth noting that under current law, lenders must conduct financial assessments of prospective reverse mortgage borrowers. Unlike with traditional mortgages, borrowers are still responsible for paying their own taxes and insurance, so the lenders need to make sure this won’t be an issue. If it appears the borrower may have trouble keeping up with these costs, it won’t prevent them from getting a reverse mortgage, but a portion of the proceeds will be set aside to ensure the property’s taxes and insurance will continue to get paid.

An example
To illustrate how a reverse mortgage works, let’s say that you own your home free and clear, and its current appraised value is $250,000. After considering your age and the loan’s anticipated interest rate, HUD approves you for a $100,000 reverse mortgage, which you choose to receive as a lump sum with a 5% fixed interest rate (including mortgage insurance).

After you get the $100,000, the interest will start to accumulate. In this scenario, here’s how your loan balance could increase over time.

Years since loan origination Approximate loan balance
1 $105,116
2 $110,494
5 $128,336
10 $164,701
15 $211,370
20 $271,264
30 $446,774

The important takeaway from this chart is how quickly a reverse mortgage can eat away at your home equity — especially as the loan ages. Since the loan won’t be repaid until the home is sold, the balance continues to climb rapidly.

A reverse mortgage could give you some much-needed cash
It’s easy to see why people might want to get a reverse mortgage. It can be a good way to get some extra money to cover expenses, or could provide an income stream to compliment Social Security and any other sources of retirement income you may have.

In addition, under the terms of a reverse mortgage, the borrower retains the title to their home. Any income received from a reverse mortgage will have no effect on Social Security or Medicare eligibility.

…but there are some drawbacks
Before you apply for a reverse mortgage, you need to be aware of the cost. According to a calculator provided by the National Reverse Mortgage Lenders Association, the average reverse mortgage borrower can expect to pay $8,908 in fees and other closing costs on a $100,000 reverse mortgage.

In other words, a reverse mortgage is a rather expensive form of borrowing, and there might be cheaper alternatives. For example, a home equity line of credit can generally be obtained without any closing costs and just a small annual fee. According to the HELOC calculator on one lender’s website, a $100,000 HELOC on a $250,000 home can be obtained with a variable interest rate as low as 3.875%, with a low $75 annual fee and no closing costs. Plus, with a HELOC, you have the ability to borrow only the money you need. Keep in mind however, that unlike with a reverse mortgage, you’d be responsible for making loan payments.

Another drawback is that you’ll own less of your house. If you plan on leaving your home to your loved ones, a reverse mortgage is probably not the best idea.

A reverse mortgage can get you some much needed cash to help with expenses or increase your cash flow in retirement, but make sure you know what you’re getting into before applying. If you can live with the expenses and aren’t worried about leaving your home to your heirs, getting a reverse mortgage in 2016 may be the right move for you. And, if you decide to proceed with a reverse mortgage, interest rates and fees can vary considerably, so be sure to get quotes from several lenders in order to get the best deal.

The $15,978 Social Security bonus most retirees completely overlook
If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. In fact, one MarketWatch reporter argues that if more Americans knew about this, the government would have to shell out an extra $10 billion annually. For example: one easy, 17-minute trick could pay you as much as $15,978 more… each year! Once you learn how to take advantage of all these loopholes, we think you could retire confidently with the peace of mind we’re all after. Simply click here to discover how you can take advantage of these strategies.

 

All copyright credits to www.fool.com

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Don’t be suckered into buying a reverse mortgage

Reverse mortgages sound enticing: The advertisements you see on television, in print and online give the impression that these loans are a risk-free way to fill financial gaps in retirement. However, the ads don’t always tell the whole story.

A reverse mortgage is a special type of home equity loan sold to homeowners aged 62 and older. It takes part of the equity in your home and converts it into cash payments. The money you get is usually tax-free and generally won’t affect your Social Security or Medicare benefits. The loan doesn’t have to be repaid until you or your spouse sells the home, moves out, or dies. Also, these loans, usually called Home Equity Conversion Mortgages (HECMs), are federally insured. (What’s your experience with reverse mortgages? Share your thoughts by leaving a comment below.)

But while a reverse mortgage may increase your monthly income, it can also put your entire retirement security at risk. And, according to a report from the Consumer Financial Protection Bureau, many advertisements are incomplete or contain inaccurate information.

The reverse mortgage market makes up approximately one percent of the traditional mortgage market, but this figure is likely to increase as the Baby Boom generation—those born from 1946 to 1964—retires. That’s because an increasing number of Americans are retiring without pensions and, according to the Employee Benefit Research Institute, nearly half of retired Baby Boomers will lack sufficient income to cover basic expenses and uninsured health care costs. Women, in particular, have a greater likelihood of outliving their assets due to lower savings and pensions.

This makes them all the more vulnerable to sales pitches for reverse mortgages from trusted celebrities such as Robert Wagner, Pat Boone, Alex Trebek, former Senator Fred Thompson and Henry Winkler, who played the lovable cut-up “Fonzie” on Happy Days.

Yet, the CFPB study found, many of these ads were characterized by ambiguity about the true nature of reverse mortgages and fine print that is both difficult to read and written in language that is difficult to comprehend. Many ads did not mention information about interest rate or repayment terms. “The incompleteness of reverse mortgage ads raises heightened concerns because reverse mortgages are complicated and often expensive,” the report states.

Here’s what you need to know to avoid being misled by reverse mortgage advertisements:

  • A reverse mortgage does not guarantee financial security for the rest of your life.
  • You don’t receive the full value of loan. The face amount will be slashed by higher-than-average closing costs, origination fees, upfront mortgage insurance, appraisal fees and servicing fees over the life of the mortgage. In addition, the interest rate you pay is generally higher than for a traditional mortgage.
  • Interest is added to the balance you owe each month. That means the amount you owe grows as the interest on your loan adds up over time. And the interest is not tax-deductible until the loan is paid off.
  • You still have to pay property taxes, insurance, utilities, fuel, maintenance, and other expenses. If you don’t pay your property taxes, keep homeowner’s insurance or maintain your home in good condition, you can trigger a loan default and might lose your home to foreclosure.
  • Reverse mortgages can use up all the equity in your home, leaving fewer assets for you and your heirs. Borrowing too soon can leave you without resources later in life.
  • Generally, you don’t have to pay back the money as long as you remain in your home. But when you die, sell your home or move out, you, your spouse or your estate, i.e., your children, must repay the loan. Doing that might mean selling the home to have enough money to pay the accrued interest.

If you’re tempted to take out a reverse mortgage, be sure to do your homework thoroughly.

All Copyright Credits to Catherine Fredman on consumerreports.com

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Reverse mortgages: Useful retiree tool or bad move?

Reverse mortgages, once viewed as loans of last resort, are slowly gaining some mainstream respect.

Due to both strengthened consumer protections for these loans and an aging population that is largely unprepared to deal with the reality of retirement expenses, financial advisors are becoming more comfortable with recommending reverse mortgages to some clients.

Reversed Mortgages Upside down house

Taylor Hinton | Getty Images

A reverse mortgage “can be a powerful tool because it can give you additional access to wealth,” said Rita Cheng, a certified financial planner and CEO of Blue Ocean Global Wealth. “But make sure you don’t rush into anything, and make sure you know how it would fit into your financial plan.”




In simple terms, a reverse mortgage is a loan that lets you convert a portion of the equity in your home into cash if you are age 62 or older. But unlike traditional mortgages, you have no monthly obligation to the lender. Instead, you receive the loan either through monthly payments made to you, a line of credit, a lump sum or a combination of these options.

Most reverse mortgages are done — and insured — through the Federal Housing Administration. They come with stipulations, including a requirement that the borrower has the means to pay real estate taxes, hazard and/or flood insurance, utilities and home-maintenance costs. Assuming those conditions are met, the loan must be paid only when the borrower sells the house, no longer lives there or passes away.

One aspect of reverse mortgages that make some financial planners see their value as part of a full financial plan is the fact that the available balance grows over time.

Gary S Chapman | Getty Images

It’s a bit complicated, but the idea is that whether you actually tap the loan or not, finance charges accrue to the loan.

So say you are 62 and secure a reverse mortgage worth $100,000 even though you don’t need the cash immediately. If you do not touch the money for another 10 or 15 years, the years of accrued finance charges means the total balance of the loan — and therefore the amount available to you — becomes greater.

“For a lot of people … they could be looking at a 30-year retirement,” said Tom Davison, a CFP and special projects coordinator at Summit Financial Strategies. “So 20 years from now that $100,000 could be $400,000. The balance can grow to quite large amounts, and at any point along the way, you can use it,” he added.

Liz Revenko, a CFP and senior financial planner with Mosaic Financial Partners, recently helped an elderly client secure a reverse mortgage so she could stay in her house longer than she would have been able to otherwise.

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“She didn’t want to move out or downsize; she just wants to be home,” Revenko explained. “This buys her extra years in her home.”

The client, who requires medical care around the clock, had been relying on her investment portfolio to fund her health-care expenses.

Because of the high value of the client’s home and her low mortgage balance, she was able to get a reverse mortgage of more than $300,000. The loan is reducing the extent to which she has to rely on her investments to fund her medical expenses.

While details of the client’s exact situation were undisclosed, the cost of in-home health care can run thousands of dollars a month.

“Your investment portfolio will work better if you can cut down how much you have to rely on it monthly to live. So a reverse mortgage can really help another asset.” -Tom Davison, special projects coordinator at Summit Financial Strategies

Davison said a reverse mortgage can help your investment portfolio work better.

The reason, he explained, is if you take monthly payments from the loan and reduce what you take from your investment portfolio, you lower the chance that you’ll be forced to sell investments when the market is down.

“Your investment portfolio will work better if you can cut down how much you have to rely on it monthly to live,” Davison said. “So a reverse mortgage can really help another asset.”

The amount available to a borrower for a reverse mortgage depends on several factors, including age, value of the home and equity in the home. The older you are, the greater the amount available to you.

New federal regulations are intended to help borrowers from falling into default of the loan’s provisions.

In contrast to the past, when reverse mortgages were given to borrowers based solely on the equity in their home, applicants now must undergo a financial assessment. This basically takes a look at your credit history and other sources of cash to make sure you can meet the provisions of the law.

U.S. Census Bureau data shows that more than 25 million homeowners are age 62 or older. Yet according to the National Reverse Mortgage Lenders Association, the number of senior households currently using a reverse mortgage stands at about 620,000.

But exploring the use of a reverse mortgage cautiously is not a bad thing. Financial experts emphasize that it should be viewed in relation to the rest of your financial plan.

“For underfunded people [who are barely making ends meet], it might be their last resort,” Davison said. “But for most retirees, it is only one part of their financial picture.”

All copyright credits to Sarah O’Brien, special to CNBC.com

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5 Reasons to Avoid a Reverse Mortgage

One of the retirement planning resources that has gained interest in recent years is the reverse mortgage. For many retirees, it seems like a solid idea. You get access to the equity in your home, and the bank makes a mortgage payment to you. It turns your home into a source of income.

It’s a nice thought, but the truth about reverse mortgages is far from ideal. In fact, there are a few reasons to avoid getting a reverse mortgage as part of your retirement plan. Most of these reasons revolve around the fact that this type of income stream is actually a loan against your home’s equity that has to be paid back.

Here are five reasons to think twice about getting a reverse mortgage:

Cash1. The fees are often high. Since a reverse mortgage is a loan, you are going to have loan-related fees. Origination fees and other fees on a reverse mortgage are typically rather high. A reverse mortgage is a home equity loan that isn’t decided based on your income or your credit score. As a result, there are unique risks to the lender, and some of those risks are offset by charging higher fees at the outset.

2. High interest rate. The interest rate on a reverse mortgage is often higher than the rate for a more traditional home equity loan. Between the up-front fees on the reverse mortgage and the high interest charges, you might be surprised at how little money you actually end up getting. It’s your equity, but the bank gets an awful lot of it.

key_img23. Your heirs might not get the house. When you get a reverse mortgage, you aren’t expected to make payments on the loan. Instead, the loan is paid off when you sell your home. So, if you die, the home is supposed to be sold so that it can cover the loan amount. This means your heirs can’t have the house. It is possible for your heirs to keep the house if they pay off the reverse mortgage after you die. However, this usually means that the money has to come out of the estate, reducing the total that your children and grandchildren end up with. For someone hoping to leave a legacy, this can be a real drawback.

4. You have to repay the loan when you move out. Dying isn’t the only way that repayment on a reverse mortgage is triggered. In order to avoid making payments on the loan, you have to be living most of the time in your primary residence. You are considered “moved out” if you haven’t lived in the home for a year. This includes if you enter a long-term care facility. So, if you are no longer able to stay in your home, but you haven’t died, you have to start repaying your reverse mortgage—at a time when money is likely already tight. This can put a real strain on your budget.

5. You’re still responsible for home costs. Throughout all of this, you are still responsible for your home costs. You have to pay property taxes, keep up with the homeowners insurance, and pay for regular maintenance on the home. If you have enough equity, you can get a reverse mortgage big enough to cover all these expenses, but it can be a difficult situation nonetheless.

Before deciding to get a reverse mortgage, carefully think through the situation. The high costs, combined with the difficulties that can arise if you want to move out of the house or leave property to your heirs, can make a reverse mortgage more trouble than it’s worth. A better solution if you’re strapped for funds is to set your retirement number and then look for creative solutions to help you retire without the negative baggage of a reverse mortgage.

 

 

 

Copyright credits all to FMF on money.usnews.com

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What to do in the Event of an Unexpected Retirement

retire-earlyYou try to do your best to plan for retirement, but what do you do when you’re forced to retire early?  According to two new surveys, this happens more often than you might think.  “Research from Voya Financial says that for 60 percent of retirees, the timing of retirement was somewhat or completely unexpected.  And the Employee Benefit Research Institute reports that half of workers leave their jobs earlier than expected because of health issues, the need to care for a family member, job elimination or the need, at work, for skills they don’t have.”1

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In order to figure out where you’re going, you first need to understand where you are now.  It’s important to take inventory of your financial situation.  This includes identifying all of your assets, what income you have coming in, any debts you have and the interest rates on those debts.  High interest rate debt consumes a larger portion of your cash flow, so it’s best if you can reduce or eliminate debt with high interest rates.  You also want to identify what expenses you have and how you’re spending your money.1

Reverse mortgage disadvantagesOnce you’ve completed this assessment, you want to evaluate whether your cash flow is enough to cover your costs.  Start by pinpointing your sources of income, i.e. retirement accounts, pensions, social security, etc.  Tim Maurer, a financial advisor in Charleston, S.C. recommends that you first take a look at your retirement accounts.  Then multiply the balance of your retirement accounts by 4%.  The generally accepted rule states that 4% is about how much you should withdraw from these accounts on an annual basis to ensure your money lasts you 30 years in retirement.   Then take that amount and add it to your other sources of income such as pensions, social security and any other sources.  It’s especially important to determine what you expect to receive from social security.  “You get an 8 percent bump in benefits for each year between ages 62 and 70 that you wait.”  Therefore, depending on your financial situation, it may make sense for you to delay collecting social security benefits.1

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After you’ve completed these steps, you should be able to see if your cost of living is higher than your income.  If it is, then you can close the gap by either spending less or earning more.  According to Maurer, the biggest improvement most people can make is to either downsize or move to an area with a lower cost of living.  However, Maurer recommends exploring possibilities for earning a paycheck, even part-time, if you’re able.  Maurer also suggests that the best way to prepare for sudden retirement is to do a trial run.   “Estimate the income you’d have coming in during retirement, and try living on that amount.  If you can’t, start saving more.”1

If you find yourself blindsided by retirement and are running short on funds, a reverse mortgage may be able to help you live more comfortably.  A Home Equity Conversion Mortgage (HECM), commonly known as a reverse mortgage, is a Federal Housing Administration insured loan.  A HECM enables seniors age 62 and older to access a portion of their home’s equity to obtain tax free2 funds without having to make monthly mortgage payments.3

 

1 Blindsided by Retirement? Here’s What To Do. – aarp.org, by Jean Chatzky, AARP The Magazine, October/November 2015, http://www.aarp.org/work/retirement-planning/info-2015/blindsided-by-retirement.html.

2 Consult your financial advisor and appropriate government agencies for any effect on taxes or government benefits.

3 You must live in the home as your primary residence, continue to pay required property taxes, homeowners insurance and maintain the home according to Federal Housing Administration requirements.

 

 

All copyright credits to http://libertyreversemortgage.com

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What is a mortgage broker and how do they work?

Happy estate agent showing new home keys to a young couple after a discussion on house plans.

Everyone has heard the term ‘mortgage broker’ at some point in our lives and honestly, most of us don’t completely understand who a mortgage broker is and what they do. Put in simple terms, a mortgage broker is an intermediary between the borrower and the bank. They essentially work with the borrower and the bank to enable the borrower to be eligible for a mortgage – purchase or refinance. A mortgage broker acts as an intermediary who brokers mortgage loans on behalf of individuals or businesses.

How does this work?

The entire process is initiated when the borrower contacts the broker. The broker then collects information regarding the borrowers income, assets, employment and credit card history. This is done to understand the position of the borrower and his ability to obtain financing. Once this is done, the broker helps the borrower decide what loans are best, appropriate loan amount and the loan-to-value. The borrower can decide on his own, the broker is present only to help the borrower understand and make an informed decision. Hiring a broker means the borrower will not have to deal with the bank directly. There are two ways in which mortgage brokers make money – charging a fee or offering no cost loans where they utilize lender credit (this essentially means the interest rate the borrower has to pay is higher).

Mortgage brokers can help a borrower find the best rates

Signpost with the words Help, Support, Advice, Guidance and Assistance on the direction arrows, against a bright blue cloudy sky.

If a borrower decides to apply for a mortgage alone through a retail bank, then the offers the borrower receives will be from a single bank. On the other hand, brokers have the ability to deal with several banks and lenders in order to find the best possible deal. Since brokers have to be approved by banks individually, every broker will have a different number of contacts and hence it is important for a borrower to pick the right broker and ask for multiple quotes from different lenders.

Mortgage brokers provide guidance when it comes to loans

A mortgage broker is present to help the borrower through the entire process until the deal is closed and the loan approved by a bank. They tend to be more available than the loan officers at banks since they work with fewer people and on a more personal level. Additionally, if a loan is rejected by the loan officer if you have a mortgage broker they will simply help the borrower apply at a different bank.

 

 

All Copyright credits to Nick Davis, articlebase.com

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Reverse Mortgage vs. Forward Mortgage

In the past several years, reverse mortgage loan has become one the most useful product in terms of providing financial security to the senior US citizens. What is a reverse mortgage? As it name tells, it is merely the “reverse” of regular mortgage loans. Simply put, in a regular mortgage you make monthly payments to the lender but in a reverse mortgage the lender pays you without you having to pay it back for as long as you live in your home. The loan is reimbursed when you die, sell your home, or permanently move out of your home.

“Why shouldn’t a senior just pull out on a regular mortgage loan rather than a reverse mortgage?” being a senior, you may be struck with this notion many times, but it would be a good thing if you realize the potentials of using a reverse mortgage loan over a forward mortgage.

Both the reverse and forward mortgages allow you to maintain the home ownership while you pay back the loan with interest. The only difference lies in the method of repayment. Here we’ve emphasized a few differences between reverse mortgage and a regular one:

* You have to make monthly installments while paying back a regular mortgage, this way you reduce debt and build up your home equity—whereas with a reverse mortgage you don’t have to make any sort of monthly payments, and the entire loan amount along with the interest has to be paid back when the homeowner dies, sells the home, or moves from it permanently.

* You need a solid credit score and income requirements to qualify for a forward mortgage, but no such requirements are needed in case of a reverse mortgage.Reverse mortgages basically help those who are house-rich but cash-poor.

* There are strict income check rules before you actually meet the criteria of a regular mortgage, but you need no cash for a reverse mortgage. Even if there is no money to pay the loan when the homeowner dies, the bank will simply seize the home. But there is an exception to this case as well, if the heirs of the deceased decide to pay the loan amount; the home stays within the family.

* Reverse mortgages are only available to senior citizens of 62 or above, while in forward mortgage there is no such age condition but it requires a firm income statement and job consistency. The conventional mortgage loan takes up the income while the reverse mortgage loan considers the value of the home.

These points will help you determine the best kind of loan suited to your needs. However, if you are a senior US resident, there may be many suitable options available to you if you opt for a reverse mortgage. It’s always better to check up with professional reverse mortgage lenders, who can guide you properly in making the right decision.

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