Reverse mortgages gain popularity 7/26/2009 12:31 AM By GREG ROBERTS Columnist
The current financial crisis has contributed to an increase in the number of reverse mortgages put in place.
The concept has been around for almost 20 years, and, as the name implies, these are loans whose features make them the reverse of a traditional mortgage. Instead of having to make monthly payments, monthly payments are received, and, as a result, they can be valuable to older homeowners because a reverse mortgage is a means to tap into the equity in your home without ever having to repay the loan.
To qualify for a reverse mortgage, all of the owners who are listed on the title to the property must be at least 62 years old. Additionally, the home must be the principal residence of the owner(s) for the majority of the year. Two good things about reverse mortgages are that there are no credit score or income requirements.
The amount that you can borrow is based on the appraised value of your home, with a maximum of $625,500 through the end of this year. Beginning in 2010, the max loan will drop back to $417,000. Another factor is the interest rate that you will be charged on the loan - lower is always better and translates into greater loan availability.
Finally, the amount that you can borrow depends on your age: If you were 65, the amount would be up to 35 percent of the home's value, and the percentages rise with age. A 75-year-old could borrow 45 percent and an 85-year-old can borrow 55 percent.
In addition to interest, there are usually four other types of fees: an origination fee, third-party closing costs, mortgage insurance premiums and a monthly servicing fee. These fees may be financed as part of the loan by having them deducted from the loan's proceeds. Thankfully, there is one measure that expresses all of the loan's various costs as an annual percentage, and this measure is the total annual loan cost (TALC). This is the figure you should use to compare lenders. If you consult with the Department of Housing and Urban Development (HUD), there is an additional fee that may not be financed as part of the loan.
As with forward, traditional mortgages, there are both fixed-rate and variable-rate options. How you choose to receive the monies from your reverse mortgage depends on the option you choose. A fixed rate provides stability and the security of an interest rate that is not subject to market fluctuations, but these fixed-rate loans have limited disbursement options - usually lump sum only. The use of a variable rate does offer some flexibility in choosing how the rate adjustments work, and there are more payout options.
You can check out several different websites on reverse mortgages, but one good one is www.goldengateway.com.
Money-saving tip: If you forfeit unused minutes each month with your cell phone contract, you might want to consider a prepaid plan. You simply pay in advance for a bundle of airtime, and there is no two-year contract. Check out www.net10.com, or www.virginmobileusa.com.
Got a financial planning question for Greg? You may e-mail him at greg29803@gmail.com.
Greg Roberts is a certified financial planner with 35 years of financial and estate planning experience.
Notice about comments:
AikenStandard.com is pleased to offer readers the ability to comment on stories. We expect our readers to engage in lively, yet civil discourse. AikenStandard.com does not edit user submitted statements and we cannot promise that readers will not occasionally find offensive or inaccurate comments posted in the comments area. Responsibility for the statements posted lies with the person submitting the comment, not AikenStandard.com. If you find a comment that is objectionable, please click "report abuse" and we will review it for possible removal. Please be reminded, however, that in accordance with our Terms of Use and federal law, we are under no obligation to remove any third party comments posted on our website.
Posted by: Jarred Ritte On: Thursday, August 13, 2009 2:45 PM
Comment Title: Great Savings with Prepaid Phones
Being on prepaid is a super way to save money. First of all there are no Bills, so no bad surprises at the end of the month. Net10 has great deals with low rates of 10cents per minute and 5cents per text. Not only is Net10 cheap, they also have no roaming charges, no cancellation fee and no contracts. For example buying a phone with 300minute is a starting option and then you can change the amount of airtime you buy after that. Another positive is that if there are still minutes left over for a period they carry over into the next airtime window. Thus Net10 makes it possible for you to manage your phone effectively and control the costs. with Net10
Report Abuse
1