Buying a Home With Your Retirement Savings: Dos and Don’ts

 

Using your retirement savings to buy a home can be a thrilling yet daunting decision. Understanding the dos and don’ts of buying a home with your retirement savings is essential for making an informed choice that aligns with your long-term financial goals.

Do Assess Your Financial Situation

Thoroughly assess your financial situation before diving into any real estate purchase. Calculate your total retirement savings and determine how much you can comfortably allocate toward buying a home without jeopardizing your future needs. 

Consult with a financial advisor or fiduciary to ensure that this significant investment aligns with your overall retirement plan. These professionals can provide insights on how this purchase will affect your liquidity and financial security.

Don’t Withdraw Early Without Considering Penalties

Withdrawing from retirement accounts such as IRAs or 401(k)s before reaching certain age thresholds can incur penalties and taxes. Understand the rules governing your specific accounts. 

If you’re under 59, you may face hefty early withdrawal penalties. Even if you’re above that age, consider the tax implications of large withdrawals. 

Explore options such as taking a loan from your 401(k) rather than a direct withdrawal to avoid unnecessary costs.

Do Consider Non-Standard Housing Options

Exploring alternative housing options can help you make a more financially sound decision. For instance, exploring things to know about high-quality prefab homes can reveal cost-effective and sustainable living solutions you may not have considered. 

Prefab homes often come with lower initial costs and reduced maintenance expenses, making them an attractive option for retirees. Evaluate different housing types to find one that fits your budget and lifestyle.

Don’t Neglect Future Expenses

Buying a home is just the beginning; ongoing expenses such as property taxes, maintenance, insurance, and utilities can add up quickly. 

Factor these costs into your budget to ensure you can sustain homeownership without financial strain. Additionally, consider the potential need for modifications to accommodate aging in place. 

Planning for these expenses upfront can prevent unpleasant surprises later on.

Do Explore Financing Options

Even if you have substantial retirement savings, exploring financing options can help preserve your nest egg. Look into mortgages designed for seniors, such as Home Equity Conversion Mortgages (HECMs), which allow you to use home equity for ongoing expenses without monthly mortgage payments. 

Another option is a reverse mortgage, which provides income based on your home’s equity. Consult with a mortgage specialist to understand the terms and decide if these options suit your needs.

Buying a home with your retirement savings is a major financial decision that requires careful consideration and planning. By understanding the dos and don’ts of buying a home with your retirement savings, you can make a choice that ensures financial security and peace of mind.

Assess your financial situation meticulously, consider alternative housing options, and explore various financing avenues. 

Don’t withdraw funds prematurely without considering penalties, and don’t neglect future expenses. 

Remember, knowing the ins and outs of this process can safeguard your retirement lifestyle and provide you with a home that meets your needs and aspirations.

Everything You Need to Know about a Reverse Mortgage but Were Too Afraid to Ask

There's nothing quite like the feeling of owning your own home. It’s an investment you don’t take lightly. From the purchase of your first home to moving on to what will be your family home, you’re not just placing a roof over your head and the heads of your family, you are creating memories.

But not everyone can afford to pay the monthly mortgage once they turn 62 and the retirement years loom large. After all, you will no longer be earning a paycheck but instead living off your savings and/or a 401(K) retirement plan. 

But what can you do if you find yourself in the position of having to choose between paying unexpected expenses like medical care or home repair/renovations, and paying the monthly mortgage payment?

One financially smart place to seek help is by applying for a reverse mortgage loan. While there are different reverse mortgage pros and cons, generally speaking, a reverse mortgage can save you a whole lot of financial and emotional heartache.

According to a new article, reverse mortgages are a way for homeowners 62 years of age and older to leverage the equity in their home in the form of monthly payments or one lump sum payment. 

With a reverse mortgage, a homeowner who has considerable equity built up in their home (or who owns their family home outright), can withdraw much of this equity in the form of cash and never have to pay another mortgage payment again. 

What’s more, they never have to pay the loan back until they either move or the borrower passes away.

The Home Equity Conversion Mortgage (HECM) is, at present, considered the most popular form of reverse mortgage since it is back by the federal government.

How a Reverse Mortgage Works

Regardless of what the reverse mortgage offers, some qualified homeowners might not be in the position to borrow the entire value of their home even if they paid the mortgage off long ago. 

The homeowner can only borrow the “principal limit.” This value is calculated based on the age of the youngest borrower and/or eligible non-borrowing spouse. 

It also takes into consideration, current interest rates, the home’s present value, and the HECM mortgage limit which in 2021 is $822,275.

The older a homeowner is, the higher principal limit they are likely to receive. Accordingly, the more the home is worth and the lower the interest rate, the more cash they will receive also. If the homeowner chooses a variable rate, the amount of cash could increase.

Variable rate options include the following:

--So long as at least one of the borrowers lives in the home, the borrower can receive equal monthly payments.

--These equal monthly payments are for a pre-selected or fixed amount of time agreed upon when signing the reverse mortgage paperwork.

--A line of credit.

--A combination of fixed monthly payments and a line of credit for the duration of your stay in the home.

However, if you’d rather go with a HECM that’s backed by a fixed interest rate, you are eligible to receive a single lump-sum payment. Keep in mind, the homeowner still needs to come up with the cash to maintain the home and make necessary repairs.

The Home’s Rightful Owner

If you’re wondering who owns the home once you qualify for a reverse mortgage, you own the own. But when the borrower moves or passes away, the mortgage must be paid in full. 

If it’s impossible to pay the mortgage, the lender retains the right to sell the home in order to recoup their money.

Reverse Mortgage Uses

A reverse mortgage can be used for a variety of necessities that are normally associated with aging homeowners. For instance, the funds can be used for supplementing retirement income. 

It can also be used for covering the costs associated with expensive home maintenance or repairs such as a roof or boiler replacement. Some folks need the extra money for paying mounting out-of-pocket medical expenses.

Reverse mortgages are the perfect solution for covering hefty expenses that would otherwise need to be covered by high-interest credit cards and/or lines of credit.

Requirement for a Reverse Mortgage

The first requirement for qualifying for a reverse mortgage is the primary homeowner must be at least 62 years old. He or she must have paid of most of the mortgage, or all of it. The home must be listed as your primary address and you cannot be behind on payments associated with any other federal loans.

You must also have enough funds available to pay your homeowners insurance and your property taxes. You will also be expected to actively participate in an information session that’s provided by an approved reverse mortgage counselor from the U.S. Department of Housing and Urban Development (HUD).

What is a Reverse Mortgage and How is It Managed?

A reverse mortgage allows homeowners over the age of 62 to leverage their home’s equity. A reverse mortgage allows an individual who owns their home outright or who has a sufficient amount of equity in their home to withdraw some of that equity without needing to repay the loan until they move out of the home.

Reasons to Consider a Reverse Mortgage

Homeowners who opt for a reverse mortgage are not required to make monthly payments nor sell their homes at the moment. They can continue to live in their home and then repay the loan when they move out of the home or when the borrower dies. Many homeowners use this tool to supplement retirement income. They may use this tool to cover the cost of repairing the home or cover other expenses. 

A reverse mortgage is a tool that might allow seniors to get the money they need without needing to use high-interest lines of credit or other expensive loans. Home Equity Conversion Mortgage loans are popular. These are backed by the federal government.

Requirements for a Reverse Mortgage

To qualify for a reverse mortgage, the homeowner must be over 62 years of age. There are exceptions where a primary homeowner who is over 62 and a spouse who is under 62 could qualify if they meet certain eligibility criteria. To qualify, you must own your home outright or only have one lien you want to borrow against. 

The proceeds from the reverse mortgage must first be used to pay off any existing mortgage on the home. The home must be your primary residence, and you must live there. Homeowners will need to stay up-to-date with their property taxes, legal obligations, HOA dues, and homeowner’s insurance. 

They must keep the property in good condition. The property has to be a single-family home, townhouse, condominium, or a multi-unit property with a maximum of four units. Manufactured homes built after 1976 can also qualify.

How Much Money Do You Get from a Reverse Mortgage?

The answer depends on factors such as the current market value of the home, your age, and the type of reverse mortgage you apply for, including a home equity conversion mortgage, proprietary reverse mortgage, or single-purpose reverse mortgage. The older you are, the higher your principal limit will probably be.

When used properly, a reverse mortgage can be a financially liberating tool. Seniors will need to use caution. They must budget the money they receive appropriately and get the most use out of it.

Should I Get a Voluntary Life Expectancy Set Aside (LESA) Even If I Don’t Need It?

A Life Expectancy Set Aside (LESA) — think escrow account for property taxes and insurance — might be mandatory for some reverse mortgages to be approved, but that’s not the only reason to have one.

Most borrowers looking to secure a reverse mortgage proceed with a LESA to satisfy financial assessment rules required by the Department of Housing and Urban Development (HUD), but you may also include one in your loan voluntarily.

Read on to understand when a LESA is mandatory, and why a voluntary LESA might benefit you even if it’s not mandatory.

When Is a LESA Mandatory?

As the years go by, reverse mortgages continue to evolve. If you’re 62 and older, a reverse mortgage allows you to use your home — fully paid off or not — to gain access to your equity and turn it into cash you can use. 

Although early reverse mortgages had no income or credit requirements, things have changed in recent years, although these requirements are still much easier to meet when compared to conventional financing.

For loans originating after April 27, 2015, the Federal Housing Administration (FHA) has increased requirements for borrowers. These requirements include reverse mortgage counseling and a financial assessment to make sure you can successfully meet the obligations that come with the adoption of a reverse mortgage. 

In addition to age, ownership, and sufficient loan-to-equity ratios, you must also satisfy the following three requirements if you want a reverse mortgage:

1. Your property tax payments must be paid and up to date.
2. You must maintain a homeowner’s insurance policy.
3. You must maintain your home up to FHA standards.

You must also show sufficient income to be able to cover your housing expenses with money left over at month’s end. If you can’t, you need a LESA.

LESAs help protect loan distributors from borrowers who might otherwise be at risk of default. That’s because the LESA is based on your life expectancy from the time of loan initiation, and consists of an escrow account. 

This escrow account sets aside money from your home equity to cover future payments — for property taxes and homeowner’s insurance — in advance by securing this money in an external account, so you can be sure you meet future loan obligations.

Is a LESA Always Required?

You might not need a LESA. A financial assessment conducted at the time of your loan application determines whether you’re at risk of defaulting — and therefore required to include a LESA in your reverse mortgage.

These assessments include a credit and financial ability review. If you’re late on mortgage or installment loans, a LESA may be required to compensate for your bad credit. 

What’s more, if a lender determines that your residual income — that is, what’s left after you’ve paid all your monthly obligations — is not enough to cover the financial requirements of the loan (or is below predetermined thresholds), the lender may require a LESA to ensure those funds are available for future property and insurance payments.

Why Would I Want to Secure a Voluntary LESA?

Even if the rules don’t require it, you can secure a voluntary LESA for your own purposes. There are a few situations where this avenue is worth exploring.

A LESA may mean less cash-in-hand, but it also means greater security if you’re concerned about meeting future loan requirements. A LESA provides a set-it-and-forget-it option for those who don’t want the trouble of remembering to stash money away for future payments. 

By adopting a worry-free way to set money aside, you can rest assured that you won’t miss future tax and insurance payments and unintentionally default on your loan.

Issues with bad credit often prevent borrowers from securing traditional loans, but reverse mortgages can be much more forgiving, even without a LESA. 

The new LESA option can help you sequester funds and automate payments, making monthly bill paying and financial planning a less stressful experience.

Factors to Consider When Opting for a LESA

If you do decide to opt for a voluntary LESA, there are a few considerations that you may want to bear in mind before you take the next step.

Fewer Upfront Funds

The process of setting up a LESA involves appropriating some of the total cash available into a fund that is set aside for specific payments. The amount can vary depending on your age, and your individual insurance and property taxes.

If the LESA is a large amount of the total proceeds, then opting for a voluntary LESA can put a dent in the total cash made available by your reverse mortgage loan. If covering large home repairs or paying off debt is your incentive for taking out a reverse mortgage, allocating funds towards an optional LESA may not be ideal. 

Additionally, if you still have a significant forward mortgage, the amount of principal funds may be so little that a reverse mortgage becomes impractical, or impossible.

Greater Peace of Mind

With a LESA, you can trade some of the financial management of future property and insurance bills for peace of mind, because you can pay for these expenses with your existing equity without having to touch your monthly income streams. 

This reduces the burden of monthly bill payments and provides you with reassurance that your loan is secure and your future home payments are accounted for.

Adding this peace of mind can be a great relief, especially if you’re looking to reduce your monthly bills and take further financial responsibilities off your plate. 

A LESA can make income and expenses less convoluted, and more of your monthly income can stay in-pocket at the end of the month, while the LESA takes care of the bill-paying process.

If you would feel more comfortable knowing that monthly taxes and insurance payments are being handled by your lender — even with sufficient income to cover these payments yourself — a voluntary LESA could be just what you need.


Contributed by: Mehran Aram, a graduate from the University of San Diego School of Business in 1984, founded Aramco Mortgage in 1998 after spending almost five years in the industry. Today, Mehran Aram is President and CEO of The Aramco Group, and has recently been honored with the distinction of CRMP(Certified Reverse Mortgage Professional) a certification held by less than 50 brokers nationwide. Mr. Aram currently heralds the title of “Mortgage Analyst” on San Diego radio stations: AM 600 KOGO, AM 760 KFMB, AM 1170 KCBQ, AM 1210 KPRZ, FM 98.1, and Fox News Monterey’s AM 1460. Garnering endorsements across the state of California, including from radio personalities, Roger Hedgecock, George Chamberlin, Mark Larson, and Ladona Harvey, Mehran Aram along with his nearly 20 years of industry experience has effectively become California’s Mortgage Expert in reverse mortgages, refinances and purchase loans, among many other loan products.

Financial Advantages You Have When You’re Older

There are many people who feel anxious about getting older, and have a certain sense of panic about leaving their younger years behind them. 

There are reasonable concerns about getting older. Your physicality won’t be what it once was, and nobody likes achy joints. However, for those of us who have a few more years on our belts, society sets aside a plethora of exclusive benefits that almost make it worth it to get old. 

Aside from the maturity that comes with being a person who has lived longer, communities often offer financial benefits that are designed to make life more comfortable for the elderly, and make it easier to enjoy retirement and traveling when we’re finally ready for our golden years. 

Here are some financial advantages that you have when you’re older...

Reverse mortgages

Today’s housing market is pretty messy. Since the housing bubble burst in the 2008 stock market crash, we have seen a slow recovery and a reluctance on the part of many lenders to give out home loans, or to allow people to get second mortgages. 

This means that many people are unable to access the capital that they are putting into their home by paying their mortgage, unless they are going to straight up sell it. However, there is a specific type of maneuver that is available to people who are over the age of 62. 

This financial action is called a reverse mortgage, which allows people to access the value that they already own in their home, but without having to pay it back as long as they are alive and living in the home. This is a great way to access a good amount of capital, quickly, without having to worry about getting buried by the payments of another mortgage. 

To find out more about this process, check out this helpful 2-part series here.

Senior discounts

The average American tends to spend quite a bit of money eating out, as it consumes more or as much of people’s food budget as grocery shopping, nowadays. 

The good news for elderly folks, however, is that many restaurants and places learned the valuable lesson of respecting their elders, and decidedly offer a discount for people who have been around for over 65 years. 

Although it may only save a few dollars, here and there, senior discounts can add up to quite a pretty penny if you are the person who eats out at restaurants rather frequently. 

These discounts don’t just work for restaurants, either, though, but also are offered at many different concert venues, movie theaters, and even museums (although what person who lived during the stone ages really wants to visit a museum).

Senior tax deductions

If you know how to be savvy with keeping track of your expenditures, any person can set themselves up with nice deductions when tax season rolls around. However, this is especially true for people who are over the age of 65. 

While the standard deduction more most younger taxpayers sits at $6,300, that same number is a whopping $7,850 for senior citizens. Married couples who are over the age of 65 also get some extra deductions during tax time, with each spouse offering an extra $1,250 towards their deductions, or a full $15,100 if they are both 65 or older. 

There are also added deductions for medical expenses for citizens who are over the age of 65, as they are often in need of more medical care as they get older.

Social Security

Contrary to what many younger people believe, Social Security is not merely a tax. Social Security is a mutual fund that people pay into throughout their lives so that they can benefit from the amount that they put into it when they are ready to retire. 

At the age of 62, citizens start to pay less on Social Security payments than they did before. After the age of 66, they begin to start getting the payout of what they put into the system on a monthly basis. 

This makes Social Security notably different from a welfare program, as it is a system that is paid into and then paid out. The amounts that you get later on in life are dependent on how much you paid in, and then your payouts are adjusted for inflation and a COLA (cost of living adjustment).

How to Overcome a Personal Finance Crisis in Retirement

retirement (Photo credit: 401(K) 2013)

Having financial troubles when you're retired is the pits. A financial crisis can strike at any time, however, and completely wipe you out. You've got little or no savings, and you just don't know what you'd do if you had to pay for a major car repair, a new furnace, or if you had to loan money to a friend in need. 

Go To Work Part-Time

One option that many seniors consider these days is going back to work part-time. Part-time work can include anything from a dietician or nutritionist to a mediator to Santa Claus during Christmas time. Now, dressing like Santa might not seem like it would rake in the big bucks, but it can. If you negotiate a 40-day season contract, you can reasonably earn between $10,000 and $50,000, depending on where you live.

That's more than some people make in an entire year. Of course, it all depends on your expertise. Entry-level Santas only make $10 per hour. 

Sell Your Annuity Payments

If you're desperate for cash, selling an annuity payment can help. This is mostly a last-ditch effort kind of thing though. Most courts in the U.S. make it difficult to sell payments to a third-party funding company unless there's a good reason for doing so.

Basically, you must prove that you will be put into a better position financially if you sell the annuity. Since annuity payments protect you from the possibility of spending through all of your retirement, many judges are reluctant to allow these transactions to go through. But you can convince a court if you wanted to, say, pay off a large debt or debts, if you were planning on using the money for emergency purposes, or if you needed the cash to pay for health insurance deductibles or an expensive medical procedure. 

Get a Reverse Mortgage

Reverse mortgages were popular in the mid-2000. They've mostly fallen out of favor because they were oversold. Still, for the right person, a reverse mortgage could be the right move. Basically, a reverse mortgage turns your home into a sort of savings account. Your home's equity is opened up, and you're allowed to spend it "at will."

Some companies encourage you to use an annuity in combination with the reverse mortgage, but many do not.

Now, because it's a mortgage, it's technically a loan against the property. The bank charges interest and fees, like closing costs, so there's a lot to consider before rushing out to sign paperwork.

One of the benefits of this type of loan, however, is that it does not need to be repaid prior to your death. If you plan on staying in the home forever, the reverse mortgage will be repaid either by your children or the home will be given back to the bank and the bank will sell it.

You can get around this by buying a life insurance policy that's just large enough to pay off the mortgage when you die. That way, the house stays in the family, but you get the lump sum of cash you need right now.

Anthony Jensen has worked with a number of retirees. He is thrilled to help people through difficult financial times.

Reverse Mortgage Lenders.

To put it simply, reverse mortgage can be categorized under home loans that possess special features. One of these special features permits you to receive cash for a certain portion of the home equity. This system of mortgage is particularly beneficial for the older generations, specifically the retired ones who do not have any means of income. This can help them positively and with its increasing benefits becoming more popular among the masses, reverse mortgages have gained immense popularity and there are several companies that are vying to provide and offer this incredible service to their customers. 

Reverse Mortgage is a lending system that is typical of the United States and traditionally involves activities by large, well known banks. 2011 was the year when several famed banks emerged victorious in terms of providing reverse mortgage. To name a few, Wells Fargo, Bank of America and MetLife Bank made it to the top of the list. Of the total reverse mortgages, Wells Fargo and Bank of America were successful in generating 43 %, which was promptly followed by MetLife.

All the same, it should be noted that there has been a drastic change in the reverse loan markets and the scenario has changed quite dramatically. Earlier, it was the banks that were held in high regard when it came down to reverse mortgages. The tables were turned when in the year 2011, Wells Fargo and Bank of America found it inappropriate to provide reverse mortgages to their customers. They gave a very simple reason, which was quite the concern at the time – the dwindling prices especially concerning homes. Besides, the financial standing of the person borrowing the mortgage did nothing to influence their decision making process. This area received another blow when in 2012, MetLife made a crucial decision of parting ways with retail banking. Therefore, what the customers have today are several small scale reverse mortgage lenders mushrooming all over the globe that do not particularly have any experience in the areas of traditional banking.

It took just 2 years to completely transform the face of the reverse mortgage world. Between the years 2011 and 2013, a tremendous change took place and therefore, the popular banks that were known for providing excellent reverse mortgage services suddenly died down and were replaced by smaller known companies. As per the latest information, this year, the company that tops the list of providing ace reverse mortgage services is Liberty Home Equity Solution, which is followed by Security one Lending and American Advisors Group to secure the second and the third place respectively. The top 10 list was rounded by Associated Mortgage Bank.

Although these companies emerged victorious in the year 2013, there has been a drastic reduction in the overall volume of the reverse mortgage, 50 % to be precise. There is a possibility that the consumers have a deep sense of trust instilled in bigger, well known brands and therefore, they fail to apply the same level of trust on brands that are not that well known, despite their specialisation and area of expertise belongs specifically to the reverse mortgage area.

The best thing that you can do is familiarise yourself with these companies and learn more about their policies and standards. Usually, it is far easier to learn more about well known stalwarts like Wells Fargo since people are aware about it. However, it is also important that you go the extra mile to learn about the other reverse mortgage lenders as well before you make your decision. The best way to do this is by thumbing through reviews of people who have previously availed of their services.

4 Questions Every Borrower Should Ask Up Front About Their Mortgage

When applying for a home loan, be sure to consider the initial costs and interest, as well as the terms and conditions of the loan before signing the contract and close escrow. As a home buyer age 50 or older, it is imperative that you know the terms of your loan before you enter into a contract that is not designed to benefit you. 

As a side note, once you have the basics down, it's simple enough to find a GTA mortgage rate comparison service online, so there's no need to worry about that. Getting the fundamentals down is absolutely vital before locking in a loan, so make sure to do thorough research. 

With so much focus put on interest and monthly mortgage payment, many new home buyers forget to ask the important questions up front. Here are four vital questions to ask after you receive an approval and accept a home loan. 

What are the Costs of Obtaining the Loan? 

Just because the lender offers a competitive interest rate does not mean that the difference of 0.5% interest will offset the initial costs of obtaining the loan. One question all borrowers should ask the lender before accepting an offer for credit is how much are origination fees, discount fees to lower interest, the appraisal, the credit report, administrative fees, document prep fees, closing costs, title insurance, and any other fee the lender charges upfront. 

All lenders are required to provide a Good Faith Estimate, which details the out-of-pocket closing costs necessary just to get the loan. Compare these estimates and keep these figures in mind before making a decision. 

How Long Will It Take Me to Break Even if I Buy Discount Points? 

If you have the option to buy discount points to lower your interest rate, it is important to do the math to determine if buying these points is going to pay off based on the length of the mortgage. When you are buying a new home, the best way to determine if the discount points will really offer you a discount is to divide the upfront cost of the points by the amount you are saving monthly with the lower rate. 

This will show you how many months it will take you break even. You can determine if you will be staying in the house long enough for the discounted rate to pay off. 

Is there a Pre-Payment Penalty? 

Some mortgage loans have terms written into the contract that restrict you from paying your mortgage off early without being charged a pre-payment penalty. A pre-payment penalty is a common term built into a loan contract to ensure the lender earns a reasonable amount of profit in interest for extending credit. 

To prevent a borrower from refinancing as soon as the loan goes through, the lender may charge a percentage of the remaining interest due to borrower to close the mortgage contract. Review how long the penalty is valid and determine if the fee is fair compared to the common fees that other lenders charge. 

How Long will it Take for the Lender to Fund the Loan? 

You need to know the average funding times so that you know how long to lock in the rates. Today, most lenders require you to lock in your rates so that you can avoid falling victim to a sudden rate increase before the loan closes. 

The average funding time frame ranges between 20 and 45 days, but in some seasons funding can take longer. Find out the anticipated turnaround time and how long funding will take to protect your interests. 

When you are applying for such a large loan like a mortgage, you need to look past interest and monthly payments and assess the terms and conditions of the loan. By asking the right questions, you can avoid entering into a contract close to retirement that will not benefit you long-term. 

About the Author: Marley Thomas is a freelance finance and real estate industry blogger. He takes pride in providing consumers with the best research upfront, so they can feel confident in making the right decision for themselves.

Reverse Mortgage vs. Payday Loan, the Hard Facts

Loans (Photo credit: zingbot)

Reverse mortgage vs. payday loan Reverse mortgages and payday loans have significant similarities and differences. If you're looking for the hard facts, you will find them here. Both reverse mortgages and payday loans can be used when you are in need of immediate money, although reverse mortgages can be drawn monthly too, which would provide long-term financial stability. 

Reverse mortgages are primarily for those of retirement age.

A reverse mortgage allows you to draw money in a lump sum or you can receive monthly payments. Reverse mortgages are common for those of retirement age because it provides an opportunity to starting preparing for retirement living. Often times, retirees will invest in property, RV's, or park model homes so that they can retire without financial struggle. If you are not ready to sell your house but you'd like to purchase something for retirement, a reverse mortgage provides that opportunity.

Reverse mortgages are based on the equity of your home.

In order to receive a reverse mortgage, your home has to be appraised at a significantly higher price than you currently owe on your home. This may not be possible with the current condition of real estate. During the economic recession, homes lost a large majority of their value and their equity quickly plummeted. Before you consider a reverse mortgage, it's a good idea to have the equity of your home appraised so that you can see where you stand financially.

Reverse mortgages have interest that will be added to your mortgage.
Like all loans, a reverse mortgage has an interest rate. This interest will be accrued to your mortgage, so it's important that you keep a close eye on the interest that you are accumulating. Essentially, your reverse mortgage will draw equity away from your home, since your mortgage will continuously increase because of this interest. This makes reverse mortgages unfavorable to some, but if you're not in a position where you feel comfortable selling your home, they may be the perfect option.

Payday loans often earn their money from repeat loans.

Payday loans have a poor reputation among many financial advisers because payday loan companies earn about ¾ of their income from repeat loans. This is often because payday loan companies encourage borrowers to continue drawing loans when they cannot afford to repay their initial loan's fees. 

• Why Would You Want Payday Loans Online? (savealittlemoney.com)

This leaves the borrower helpless to the high interest rates of the payday loan and they often struggle to break free from the amount of debt they have accumulated.

Payday loans have high interest rates; the lowest APR cap is 156%. (Texas)
Payday loans have very high interest rates but they are intended to be short-term loans. The lowest annual percentage rate cap is found in Texas and is 156% of the loan. While you would never take an entire year to repay a payday loan, this helps increase the extent of the interest. Payday loans typically have a two week payback period. This means you must recover the funds to pay back the loan and all fees associated with the loan within a two week period.

Payday loans provide short-term financial relief and are typically easy to obtain.
Payday loan companies are not very picky when it comes to accepting borrowers. Unlike banks and financial institutions, credit is not a huge factor when it comes to approval. If you have a bank account, proof of income and a driver's license to identify yourself, it's very likely that you will be approved. As far as we know, there are no payday loan companies that perform a complete and comprehensive credit check. In fact, it's usually harder to obtain a credit card than it is to obtain a payday loan.

How Reverse Mortgage Calculator Makes Your Retirement Life Easy

Mortgage (Photo credit: 401(K) 2012)

A lot of homeowners have opted already for reverse mortgage and there are many who are following the same direction. If you belong to the group of those who face immense problems while they return the existing home loan then, I must tell you, that reverse mortgage is the best option. It is usually given to senior citizens who are above 62 years old for converting one of the home equity’s part into cash. This step not only helps in improving living standard of the senior citizens after their retirement but also makes their life tension free. Once you convert a part of your equity into cash there is no need of any further payments to repay the mortgage loan. In this case, a reverse mortgage calculator can even give you a brief idea about the reverse loan.

With an options like buy to let mortgages, making use of a reverse mortgage calculator is also one of the best options of getting an idea of the amount that one may get from their reverse mortgage. It is an estimate and should not be mistaken with the actual amount. In order to use this calculator, seniors need to input their home value, age, mortgage balance(existing one) and the interest rate(estimated).The calculator uses all the information for determining whether any individual can be considered for a loan and the amount he will receive.

Make Use Of A Reverse Mortgage Calculator For Determining The Right Time For A Loan

In order to qualify for any reverse loan, seniors must have a home or any mortgage balance. Many seniors already know about this but there are still few who are not aware of the exact equity they would require to get a loan. This is where a reverse mortgage calculator comes to their rescue. These calculators make use of every information related to the senior and calculate the amount of equity that one needs to pay. Once the equity is already known, more research can be made using the calculator and one can even calculate their individual payouts.

In order to find the impact of age as well as equity on their payout, this calculator can be used for seeing that what amount of money can be received if the seniors wait for a few more years and then apply for this particular loan. There is even a chance for prospective borrowers to explore other options if they calculate potential payout by considering a high property value, small mortgage balance and various interest rates. This even helps the borrowers to finally reach a decision that whether they consider a particular time to the best for taking a loan or they prefer to wait.

Reverse mortgage calculators are considered great tools that can be used by potential borrowers before they apply for a loan. The different options that are available to a consumer before getting a loan makes them more confident and they come to know what they keep at stake for getting their respective loans. Moreover these calculators make the consumers realize how they may benefit from a reverse mortgage loan. After they start using these calculators, borrowers seem to have much better understanding about reverse loans and the possible eligibility's.

The best part about a reverse mortgage calculator is that the tool is available for free online. They are basically designed for educating seniors about reverse loans so that they can opt for them confidently. Though these calculators cannot provide accurate results but they prove to be quite helpful for seniors in determining the correct time for a reverse loan. Their retirement life becomes completely hassle free with no worries about money.

Author bio:

Jonny Pean is a financial consultant. He manages to take out time in writing blogs covering topics like mortgages, debt, saving money and recommends to use mortgage calculator from emortgagecalculator.co.uk.

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A Reverse Mortgage Is A Smart Alternative For Tapping Home Equity

With the current lending climate, getting equity back out of a home is a challenge. Lenders aren't eager to do home equity lines of credit or second mortgages as they were a few years ago. However, the reverse mortgage is making a comeback, according to Annamaria Andriotis of Smart Money magazine.

You may be familiar with reverse mortgages from TV ads and infomercials. They may sound too good to be true, but reverse mortgages are backed by the Federal Housing Administration and are a legitimate government program, not a late-night TV scam. 

Smart Money says that MetLife Bank has increased its reverse mortgages by 171% from 2010 to 2011. That's a substantial increase for a single product by a single lender, even though the total number (10,512) may seem low.

Reverse mortgages are, of course, only available to people ages 62 and up. Homeowners are allowed to get a loan for a percentage of the home's value: up to 62% for a 62 year old and up to 72% for an 80 year old. There are plenty of associated fees with a reverse mortgage, including origination and HUD mortgage insurance premiums, but they can be a good way to leverage the equity in your home and use that money as long as you live there, especially if you can't get a traditional home equity loan.

How to find a good reverse mortgage lender? 

The National Reverse Mortgage Lenders Association has a website with lots of information on how to do that. You can also try Weemba.com. Weemba allows you to register and post your loan needs, including for reverse mortgages, at no cost to you. 

Because your post only shows up under a nickname, you can include information about the value of your home, how long you've been paying on it, any income that you have and a no-cost, no-impact credit score. No one can connect the information to who you really are. If a professional lender finds your post and wants to contact you, you will get an alert by email letting you know that, and you can say yes or no to it as you wish.

Besides reverse mortgages, Weemba allows you to post for all kinds of loan needs, both personal and business: HELOCs, mortgages, home improvement loans, medical loans, lines of credit, car loans, RV loans, boat loans and all kinds of business loans too. 

There is never a fee for a borrower to use Weemba; it is not a direct lender. The website simply provides users with the tools to present themselves to professional lenders in the best way possible. Weemba is changing the way that borrowers and lenders find each other online, forever.