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Hello, and welcome to Your Money 2.0. I’m Justin Lally, a reverse mortgage specialist at Cambridge Credit Counseling Corp. Over the next 20 years, over 70 million baby boomers will be entering a retirement, and if current statistics are correct, a large percentage of these individuals are woefully underprepared. According to reports from Reverse Mortgage Magazine, only 38% of baby boomers had saved enough to get them through retirement. Although that statistic in and of itself is unsettling, a review of the overall retirement landscape is even more startling. Approximately 78 million Americans have no retirement savings plans. The sad fact is social security will do little to accommodate the financial circumstances of retirees, and many may need to rely on the equity in their home for survival.
Some of you may be saying, “That’s what Social Security is for.” Well, Social Security was never intended to be the sole source of income for retirees. Social Security was created to provide retired persons and with the resources to cover basic expenses. When it was established, the average life expectancy was 65 years old; however, the average lifespan for Americans has increased by almost 30 years. Needless to say, this has compromised the effectiveness of Social Security. The average senior citizen receives ,000.00 a month for Social Security; however, their median annual expenses are ,000. The math alone tells us we must do far more to build appropriate retirement funds.
For those of you who are retired, or will soon be, there are financial tools available to help you if your retirement savings are lacking. A reverse mortgage enables homeowners who are 62 years or older to convert part of the equity in their homes to subsides retirement. The unique aspects of a reverse mortgage can provide much needed funding without having to sell the home, transfer title, or take on a new monthly mortgage payment. In essence, a reverse mortgage is a regular mortgage reversed – instead of the homeowner making payments to a lender; they receive money from the lender. Reverse mortgage loan advances are not taxable, and generally don’t affect your Social Security or Medicare benefits.
There are three types of reverse mortgages homeowners can choose from, each with its own purpose. A Single-purpose reverse mortgages is generally the least expensive, and restrictive option. These mortgages are offered by state and local government agencies and nonprofit organizations. As is indicated by their name, this type of reverse mortgage can be used for only one purpose, which is stipulated by the lender. Homeowners can also apply for a Home Equity Conversion Mortgages (HECMs) which are backed by the U. S. Department of Housing and Urban Development (HUD). And finally, proprietary reverse mortgages are private loans that are backed by the companies that develop them. The proceeds from a HECM or proprietary reverse mortgage can be used for multitude of options including supplemental retirement income, home repairs, meeting healthcare needs, preventing foreclose, and so on.
Before applying for a HECM, and some proprietary reverse mortgages, you must receive a counseling session as a condition of financing. The counselor must review additional options available to the homeowner, including home equity conversion options currently available. Furthermore, the counselor will discuss the financial implications of entering into a reverse mortgage, including tax consequences and the impact of a reverse mortgage on the homeowner’s estate. Most counseling agencies charge around 5 for their services, and the fee can be paid from the loan proceeds.
Just how much can a reverse mortgage add to your retirement portfolio? The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA’s mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, and the lower the interest, the more you can borrow. To learn more about reverse mortgages, please visit www.aarp.org/revmort, a website established by AARP’s Reverse Mortgage Education Project or contact your local HUD Certified Housing Counseling agency. Well, that’s it for this edition. As always, we welcome your feedback and ask for your thoughts and suggestions by e-mailing us at firstname.lastname@example.org. Thank you for watching. Until next time, I’m Justin Lally for Cambridge Credit Counseling. Video Rating: / 5
Want to know how much you would qualify for?
“How Does a Reverse Mortgage Work?” is clearly and simply explained in this short video. Completely understand HECM in 4 minutes.
Hi, I’m Deborah Nance and today we’re going answer the question – “How Does A Reverse Mortgage Work”
So here we go. First the lender must determine the loan amount. They will use a formula set out by FHA that takes into account the value of the home, the age of the borrowers and the current interest rates to determine the loan amount.
Once they know what you qualify for, then they will want to know how you would like recieve your loan funds. The closing costs of the loan will be rolled into the loan itself. This means you will have a starting balance equal to those costs plus any other funds you decide to take at closing.
Perhaps you have your home paid off and do not need to have all of the loan money right now. You could choose to take the loan proceeds in the form of TENURE, (a monthly payment for as long as you live in the home.) In this scenario, on the first of every month you would recieve tax free funds from the lender. Each month you would also recieve a mortgage statement showing you the prior month’s loan balance, the amount of the payment to you, the amount of interest and insurance charged and the new loan balance.
Or perhaps you would like to have all the loan funds ready and available as you need them, in a line of credit. In this scenario, you would receive a statement each month from the lender showing the existing loan balance, and the amount of funds previously available in a line of credit. The statement would also show any withdrawals you made from the line of credit the prior month and the new available line of credit.
One of the coolest features of this particular scenario is that the line of credit on a reverse mortgage grows over time. The amount available to you in a line of credit grows at a rate equal to the rate charged on the loan itself, plus 1.25%. So, a reverse mortgage line of credit in the amount of 0,000 today could be 4,000 plus next year. That is a great incentive to limit your withdrawals for emergencies building up the line of credit over time so that when you are 70,80, or 90 and really need the funds for home health care or other emegencies, you have more to draw from.
Another scenario would be to take all the money right now. Maybe to make a major purchase, like a second residence or investment property.
The last (and most popular) scenario is to combine the different payout options. Perhaps taking some funds at closing to payoff other debts and leaving the rest of the proceeds in the growing line of credit. It’s your choice. I have had clients who choose some cash, some line of credit and a tenure payment as well. It’s up to you.
If you currently have a traditional or forward mortgage, you can use the reverse mortgage to pay it off. In fact it is required by the lenders that any existing mortgages on the property must be paid off with the reverse loan proceeds..
You know the bank is going to make money on the Reverse Mortgage, right? They’re a bank, that’s what they do. I mean really!… they’re in those big tall buildings downtown and they are happy to make money off the millions of us living in our little home sweet homes.
Basically, the banks and investors are just very patient. They wait. They wait until you die, sell, or permanently leave the home due to medical reasons. Then all the funds that have been borrowed, plus all the accrued interest and insurance is due and payable. Usually the heirs will sell the home, payoff of the reverse and keep the change. But, if the home does not have enough value to payoff the balance, then what? This part is pretty cool….The reverse mortgage is a non-recourse loan. This means if the proceeds from the sale of the home are not sufficient to payoff the mortgage the bank has “NO RECOURSE” to the borrower (or their heirs) for the shortfall. So, the worst that can happen is that your kids get nothing from the home when you pass away.
Well that took a little longer than I thought, so thanks for sticking with me.I hope you found it to be helpful. I’d appreciate you leaving a comment and any other questions you might have in the comments section below. I’ll be answering more questions in the following weeks so don’t forget to Subscribe to my YouTube Channel and be notified when a new video is released.
If you want to know specifically what you or your parents might qualify for on a reverse mortgage, please click on the link below to provide me with the basic information needed for an analysis. You’ll have your numbers in no time at all!
The postings and opinions on this site are my own and do not necessarily represent the position of my employer.
Deborah Nance, NMLS#202003 Equal Housing Lender
In this video, might learn all you need to know about your credit rating and report, including just what it is and exactly how to improve it (sign: they’re four significant techniques to do so)!
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For me, credit scores tend to be the most obscure and methodical principles to a customer. I actually had consumers tell me something they swore would help their credit, when indeed it was the entire opposite.
One of the numerous examples We have occurs when I had a client let me know which he never ever totally paid down their charge cards because paying rates of interest aided him get a significantly better credit score. I’m going to teach you what determines your credit score, the simplest way to get and keep a high rating, and some common fables about your FICO rating.
First let’s look at what determines your credit rating. You can find 5 main aspects. Coming in at 35percent of one’s total credit history will be your payment history. Becoming late on any bills, as well as worse having all of them go into selections, is the easiest method to drop your
The 2nd largest aspect at 30per cent may be the quantities you borrowed from. When you yourself have 5, 10 or higher bank cards and they’re all maxed away, it shows you’re a higher credit risk b/ you can’t apparently spend your bills off. Period of your credit score is available in at 15percent. Preferably 7 years or higher is exactly what is recognized as a long credit rating.
Finally at 10per cent each is brand new Credit needs and style of credit mix used. Brand new credit is in mention of the how many times you operate your credit — be it for a cell phone, auto loan or other type of credit. If you should be regularly running your credit, it is probably performing you some damage. Types of credit blend being used fundamentally involves what sort of accounts you have got open.
The perfect circumstance is some mystery mixture of a home loan, auto loan and two to three charge cards. That doesn’t indicate you really need to go get a car loan when it does not add up financially. Remember, it’s only a tiny element, therefore lengthy while you possess some credit being used you will be alright.
When it comes to getting and maintaining a high FICO rating, there are a few recommendations you need to follow. First off, is make certain you pay-all your bills promptly. As a reminder, we set an alarm on my phone, that is synced to
Every firstly the thirty days, my phone and perspective both remind me it’s time for you pay-all my expenses. Secondly, could be the period of your credit, if at all possible you prefer 7 or higher many years of credit rating. Eventually, you prefer about two but a maximum of four credit cards with high limits. Apart from these three things, the easiest method to get increased rating would be to avoid any court judgments, overdue bills,
When it comes to keeping your high credit score, keep in mind that credit cards generally come to be individuals biggest downfall. Yes, you will do want high limits on your own charge cards, but it doesn’t mean that you are supposed to max them on. The reality that lenders trust you with a top borrowing limit is actually a good thing. The important thing is always to do not have a lot more than 25-30% on one credit card. This will make it seem like you know how to undertake the debt more proficiently.
Now let us debunk a number of the myths most of us frequently hear. First, spending interest because you couldn’t pay back your bank card entirely, will DEFINITELY NOT help your credit rating. Once again, it is the debt to credit limit ratio that’ll be considered. 2nd, that most readily useful purchase payment program that you have never already been late on enable your credit rating.
This really is totally FALSE, the only real payment programs that will previously show up on your own credit as mentioned above tend to be structured repayments, including a residence or automobile, and revolving repayments, particularly credit cards which we already talked about.
Other items that won’t show on your own credit history unless they give you to collections are your cellphone bills, electricity invoices, and even those shop charge cards without a Visa, MasterCard, find, or American Express logo on it.
Bear in mind, without any of those logos, those credit cards, do practically nothing to aid your credit. Number three, if you don’t use a credit card that you have had for years at a time, you should close the account. Again, it is FAKE. Keep in mind, long credit history is good. You specifically don’t want to shut this unused credit card if it’s a top limitation. In reality, you ought to probably put it to use as soon as every couple of months on anything extremely small, eg socks in order to be sure they don’t shut it because inactivity.
Keep in mind, your FICO rating can be your reputation into economic world, shield it along with your life. Because you have got a reduced credit rating doesn’t invariably suggest you’ll never be able to get financing for such a thing. But having a much better credit rating, will virtually guarantee the exact same loan will undoubtedly be much easier to finance, and will also be a great deal less costly, helping you save thousands to tens and thousands of dollars every year… given that’s good to know.
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Contact a credt company to review your credit score – Equifax or TransUnion:
Ramit Sethi explains the basics of personal finance. http://cr8.lv/1OWLAMfyt
New York Times best-selling author Ramit Sethi has taught over a million students how to better manage their money.
In this clip from his online course, Money + Business for Creatives, Sethi gives an overview of how his approach to financial thinking will help you reach your personal finance goals by teaching you how to spend, save, and invest your money.
Sethi introduces a system for managing and thinking about your money so your creative business can thrive.
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http://www.freedommentor.com/personal-finance-wisdom/ – The most valuable personal finance wisdom that you probably will hear no where else. Video Rating: / 5