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.

Compare and Contrast Mortgage Proposals to Choose the Best One – Wise Tips

There’s no denying the fact that shopping around and comparing the rates on a mortgage loan will let you find the best deal. Regardless of the type of mortgage, whether you’re taking it out for buying a home, refinancing or a home equity loan, it is just a product like a car and hence the terms and conditions are all negotiable. 

Unless you compare the costs that are involved into obtaining a home loan, you won’t end up with the best one. Read on the concerns of this post to know more on comparing rates of mortgages.

Gathering information from multiple lenders

Mortgages are available from different kinds of lenders, commercial banks, thrift institutions, credit unions and commercial banks. You may be quoted different prices from different lenders and this is why it is recommended that you get in touch with multiple lenders in order to juggle between the best ones. 

Brokers are also there to arrange transactions and deals with lenders in lieu of a commission. Here too you should contact more than one broker so that you don’t end up choosing the first deal that you come across.

Gathering all information related to costs of mortgages

Make sure you receive all important information on mortgages when you work with the lenders and brokers. There’s more to it than just knowing the total monthly payment and the interest rate. 

Here are some more details that you should know about a mortgage loan before finalizing the deal.

RATES

Ask every broker and lender for the list of the interest rates and whether the rates that are being quoted are the lowest

Enquire whether or not the rate is adjustable or fixed. Ensure that the interest rates on the adjustable rate mortgages move up and also the monthly payments

Enquire about the APR of the loan. The APR includes not just the interest rate but also the broker fees, the points and other credit charges which you need to pay

If you get quotes for an ARM, make sure you ask how the rates and the monthly payments are going to fluctuate with time

POINTS

If you don’t know what points are, they are fees that are paid to the broker for the loan and they are often related to the interest rates. The more is the amount that you pay on points; the lower will be the interest rate.

Check your newspaper to know about the points and rates which are presently offered

Points can be quoted to you in dollar amounts instead of points. Then you will know how much you have to pay.

When it comes to taking out a home loan, there are many fees involved, some of which are underwriting fees, loan origination fees, broker fees and settlement costs. All lenders and brokers should give you a clear estimate of the fees. Most of these fees are negotiable and some are paid when you apply for the loan or during closing.

Therefore, it is only after taking into account all the above mentioned costs that you should select a home loan from a loan company. If you’re considering companies like iselect, make sure you compare home loans at iselect before choosing the final one.

How to Decide Which Bank/NBFC is Giving the Best Home Loan Deal

Do you plan to buy a new home this season? If you need a Home Loan for that, you have a wide range of options to choose from. These would include banks, non-banking financial companies (NBFCs), and housing finance companies (HFCs).

Even before you choose your property, it is better to look at the right kind of housing loan. But first, you must figure out whether you are eligible for the loan. Here are some quick tips to help you know your eligibility for the best Home Loan deal.

• Ensure that your credit score is in good shape. A strong, healthy CIBIL score will give you greater bargaining power when you apply for a loan.
• Know as much as possible about the prevailing Home Loan rates in the market. 
• A good way to get quicker disbursals with lower rates is to get a preapproved housing loan. Your Home Loan application has a better chance of being accepted with a preapproval. 
• Compare the rates and fees the various lenders are offering and pick the best option.
• Read the fine print, which is not always present in the brochure. Ask various lenders about the fees and costs beyond the principal and the interest. Ask anything that is relevant to your Home Loan need.
• Use the equated monthly instalment (EMI) calculator for every Home Loan you shortlist. The Home Loan EMI calculator is an extremely handy tool. It gives a basic insight into the monthly EMIs you will have to pay. It is based on the principal, the interest rate, and the tenor.

So, How would You Decide Which Bank or NBFC would Offer you the Best Home Loan Deal?

Choosing the right bank or NBFC is not only about getting the lowest interest rate. More importantly, you should deal with the best lenders in India. They would have Home Loan experts to guide you through the procedure.

• Select your Lender: Look for one who offers you several Home Loan options. Look at a broad spectrum of funds, not only from banks but also NBFCs, HFCs, and wholesale lenders. Learn in detail about their lending history, how they operate, and about their continuing services once you pay off your loan. The right lender will not only help you save time and money but also help you dispel doubts about your lending needs. 
• Interest Rates: Fixed Home Loan interest rates give you the satisfaction of being aware of your repayment amount for a definite period. Moreover, the rise and fall of interest rates in the market does not affect the fixed rate. But, you will not enjoy the flexibility of a variable rate of interest. Hence, you must know what kind of interest rate would suit you in the long run.
• Charges and Fees: Do you have to pay any continuous fees or charges? Figure out their effect. Hidden fees, which are usually seen in the form of monthly and annual charges, can greatly influence the cost of your Home Loan.
• Pay Close Attention to Margins: Lending institutions have the right to alter the mark-up rate at any time, without prior information to borrowers. In fact, they use specific determinants to advocate this change in rates. These determinants include the competition rate and the intent to gain more consumers or market share. Mark-up rates can go either up or down. Hence, when you apply for a Home Loan, make sure you know about the current changes in the mark-up rates. 

Conclusion

Applying for a Home Loan can be an arduous task. It can become much simpler when you are aware of your eligibility and the prevailing interest rates before you apply. Your chosen lender should have a comprehensive choice of Home Loan products. They must also provide regular loan health inspections to make sure you have the best product tailored to your needs.

7 Reasons Why a Check Can be Rejected by the Bank

Checks are still used by businesses and individual to pay for all kinds of services and products. Checks are much like a banking form that instructs banks to transfer funds from a particular banking account to another bank account. 

Considering the fact that checks are susceptible to fraud, banks have strict rules and violating them can cause your check to get dishonoured. In which case, the money is not transferred to the recipient’s account and the issued check is rejected by the bank. 

Whether you are the recipient or the person who wrote the check, dealing with a bounced check is frustrating. To bring clarity to the situation, here’re 7 reasons your check might have been dishonoured.

Insufficient Balance 

This is probably one of the more common reasons why checks get rejected by banks. However, this is an easy problem to detect. If you are the one who has issued the check you probably already know if your account has enough balance to clear the amount. 

In some instances, checks get bounced because banks suddenly deduct annual fees and other charges before clearing the check. The best way to find out if your issued check got rejected due to insufficient balance is by going online and checking the account statement.

Early Presentation of a Post-Dated Check

If the check is presented to the teller before the mentioned date then it can be dishonoured. No such rules apply if the check is presented after the mentioned date. However, some checks do have expiry periods.

Expired Check

If you are thinking of saving your first paycheck like some sports personalities do then you should know that you may not be able to cash it later. Checks have expiry dates and past a certain point, banks don’t accept them anymore. 

These checks are typically called stale checks. Instead of dishonouring the check banks often asks the account holder to issue a new check.

Signature Mismatch

People with multiple bank accounts often use different signatures for different banks. Mistakenly signing the wrong signature will result in the check being dishonoured. 

Banks use imaging technology to verify signatures on checks. This means if you have trouble signing with consistency, the signature may be deemed as a mismatch.

Overwriting and Other Mistakes

This is a part of check writing 101. Any overwriting or illegible letters can cause the bank to void the check. Misspelling the payee name can also result in rejection.

Checks Linked to Frozen Bank Account

Banks freeze bank accounts for all sorts of reasons. Without going into why banks freeze accounts, it’s important to know that if they do any transaction from the said account is temporarily halted. Considering that paper checks are mere instructions for banking transactions, checks linked to frozen accounts are rejected by banks.

Check Doesn’t Match Banking Security Standards 

Businesses and individuals no longer need to buy checks from the bank. They can buy checks from third party vendors and online check stores. However, when buying cheap checks online, it’s important to verify if it matches all banking security standards and regulations. Producing checks that do not match the quality standard laid down by the bank can be rejected.

6 Tips on Training Your Small Business Employees on a Budget

The value of well-trained employees to a small business is priceless. However, when severe economic times bear down on us, employee training budget is usually the first to be cut. Cutting your small business’s training budget often makes sense at the time; however, it will prove to be a costly mistake in the long run.

By giving employees an opportunity to develop their skills, small businesses stand to benefit from increased employee engagement and job satisfaction. This enhances their productivity and makes them less likely to leave.

In fact, a survey by the Society for Human Resource Management revealed that over 86% of employees attributed an organization’s commitment towards their professional development as one of the top factors that contribute towards their job satisfaction.

This has seen to employers spending over $177 billion per year on formal training and a further $413 billion on informal training. Now small business employers may feel like they cannot compete with the big boys when it comes to training expenditure. However, there are cost-effective solutions that can help you develop your workforce’s skills.

1. Know Your Needs and Identify Your Goals

You need to review your business’s goals. Research has shown that over 80% of SMB owners with fewer than ten employees did not track their goal-setting. Yet, business success often depends on setting business goals. 

Thus, being aware of your short- and long-term objectives will allow you to create an employee development plan which will facilitate those goals.

After pin-pointing specific goals for each aspect of your business, look at your workforce’s performance and identify areas that need improvement. Now observe while testing your employees to see if they have all the necessary skills you require them to have. 




Nevertheless, asking is the best way of knowing where they are struggling. A good relationship with employees is therefore important to help you realize fruitful discussions with your workers.

Testing is important as well since some employees may be unable to communicate their training needs effectively. This data will enable you to draw a baseline for goal-setting and identifying solutions.

2. Find Affordable Training Programs

A lot of trade associations often provide training programs to their members during annual events or regularly hold seminars and workshops. Check your association’s newsletter or website for information about training opportunities that come with the membership.

3. Mentoring Opportunities

By offering your workforce opportunities to learn in a peer environment, you contribute to a good office culture. You can seek help from organizations that have faced similar issues, so your employees can discover other ways of handling their jobs or gain a fresh perspective.

Moreover, consider mentors a highly important factor in your employee training strategy, as they are individuals that are experienced in their areas and thus are well suited to offer guidance and support to others. 

Mentorship is an excellent way of developing professional skills and knowledge. The majority of mentors tend to do it on a voluntary basis which means it is not necessarily expensive.

Coaching is an efficient and cost-effective method of fostering and developing talent within the organization. It will enhance not only the worker’s performance but also that of the organization. 

Unlike mentorship, it does not offer specific advice; instead, the coach uses their questioning and listening skills to help bring out the best out of an individual. Managers need to embrace the coaching role more to help employees find answers within themselves.

4. Technology-based training

The Internet abounds with information that is invaluable to your workforce. The employees can access courses from their computers at designated times. E-learning does reduce overheads while also making it possible to monitor progress, which does not only come in handy with in-office employees, but also with your remote workforce. 

They choose when and how they want their training thus enabling them to use time efficiently.

Online courses can be free, paid for, or a combination of both. They allow you to customize your employees’ experience by either allowing an open enrollment or signing them up for particular lessons.

Nevertheless, these courses are not an instant fix as you still have to ensure that your employees are responding well to the learning. You also have to be sure that the e-learning platform complements your business.

5. Gamifying the Training Experience

Incorporate games at the workstation to increase employee engagement. Learning a new game is akin to learning a new skill thus incorporating games that task the mind is important for developing the employee. 

Also, it makes the actual training much easier. Gamifying the training experience also leads to competitiveness among employees which consequently leads to increased productivity.

6. Establish Relationships

At times, a training course is what your employees could use. However, training courses are not always budget-friendly. Thus, a relationship with an organization that has a similar plight to your small business means you can share the training course thus reducing costs.

Having already established goals and put systems in place such as employee training to facilitate their achievement, you need a means of tracking your small organization’s success. 

Ensure that both employees and management are aware that their performance is going to be measured. Everyone should own their roles so that you can track their performance through efficiency and productivity metrics.

For instance, how much an employee can accomplish in a day is a productivity metric while an efficiency metric will look at how much effort and expenses are used in a particular task.

Your small business, just like any other, has top-tier performers as well as average ones. Thus, for the holistic growth and development, employee training is vital. Utilize the above cost-friendly techniques to see a boost in your staff’s efficiency and productivity.

Jasmine Williams covers the good and the bad of today's business and marketing. When she’s not being all serious and busy, she’s usually hunched over a book or dancing in the kitchen, trying hard to maintain rhythm, and delivering some fine cooking (her family says so). Tweet her @JazzyWilliams88

Active Trading Strategies to Follow in 2018

Active trading isn’t for everyone. Honestly, it is not even investing. Investing involves more than a few minutes or hours of holding a stock. 

But this does not mean that active trading doesn’t involve some form of analysis, it is just that the analyzing period is very short. That being said, active trading is an art of buying and selling securities based on short-term price fluctuations. 

For instance, if you are interested in buying shares from Compass Group, a British multinational company, you can check compass share price live and analyze its stock chart from 1 minute ago to 1 week ago and actively participate in its trading.

To accomplish an active trading strategy there are various strategies used, each with its own market environments and risks. Below are some of those strategies:

Day Trading

This is perhaps one of the most well-known trading styles. As its name implies, day trading is the method of buying and selling securities in the same day and positions aren’t held overnight. 

Although traditionally day trading is done by professional traders, electronic trading has opened up this practice to noob traders as well. Though day trading may seem like gambling, trading is an investment in trends. 

Day traders observe trends, monitor movements and know when they should buy or sell a position. Although this isn’t an unusual method, their reaction to a movement occurs in minutes or hours rather than in days or months.

Trend Trading 

This is sometimes considered as being a buy-and-hold strategy and not active trading. However, when done by an advanced trader, it can be a form of active trading. This strategy uses longer term charts, from daily to monthly, along with other methods to determine the trend of the current market direction. 



Trend traders look for successive higher highs and lower lows to determine the trend. By riding this wave, they aim to benefit from both up and downside of the market.

Scalping 

Probably one of the quickest methods in the list, it includes using various price gaps caused by bid-ask spreads and order flows. This strategy works by buying at the bid price and selling at the ask price to receive the difference between the two price points. 

Additionally, they do not try to exploit large moves or trade high volumes; rather they take advantage of the small moves that occur frequently.

Swing Trading 

At the end of a trend, there is usually some price volatility as the new trend tries to establish itself. Swing trading involves buying or selling securities as the price volatility transpires. 

Although they are usually held for more than a day, they do not cross the trend traders’ timeline. Swing traders create a set of trading rules based on technical analysis. These rules are designed specifically to identify when to buy and sell a security. 

Although this software does not have to predict the exact peak or a price move, it does need a market that moves in one direction or the other.

The bottom line is that an active trader can employ any or all of the mentioned strategies. Nonetheless, before engaging in such strategies, the risk and costs associated with each needs to be explored and understood.