Thursday, April 23, 2009
Wednesday, April 22, 2009
Reverse mortgages can provide extra cash
Many people have seen TV ads featuring actor Robert Wagner encouraging senior citizens to consider reverse mortgages to provide extra dollars for their golden years.
In a regular mortgage, homeowners make payments to lenders. In a reverse mortgage, however, homeowners receive money from a lender and usually are not required to pay it back as long as they live in their homes, according to the Federal Trade Commission.
Reverse mortgage loans, based on home equity, are repaid when homeowners die, sell their homes or no longer live in the residences.
In a regular mortgage, homeowners make payments to lenders. In a reverse mortgage, however, homeowners receive money from a lender and usually are not required to pay it back as long as they live in their homes, according to the Federal Trade Commission.
Reverse mortgage loans, based on home equity, are repaid when homeowners die, sell their homes or no longer live in the residences.
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“Reverse mortgages can help homeowners who are house-rich but cash-poor stay in their homes and still meet their financial obligations,” a report from the FTC states.
SouthEast Arizona Governments Organization, headquartered in Bisbee, offers reverse mortgage counseling at no charge, said Julie Packer, the organization’s housing programs administrator. A SEAGO counselor will counsel homeowners at their residences. There is no need to travel to Bisbee for this service.
Packer said reverse mortgages are for senior citizens who have paid off or nearly paid off their regular mortgage.
“It’s not for everyone, though,” Packer said. “It’s kind of like home ownership. Home ownership is not for everyone.”
According to the FTC, reverse mortgage loan advances are not taxable and usually do not affect Social Security or Medicare benefits. Owners retain titles to their homes and are not required to make monthly repayments.
The loan must be repaid when the last surviving borrower dies, sells the home or no longer lives in the house as a principal residence.
There are three types of reverse mortgages: Single-purpose, which are offered by some state and local government agencies and nonprofit organizations; home equity conversion mortgages, known as HECM, which are federally insured, and proprietary reverse mortgages, which are private loans that are backed by the companies that develop them.
Single-purpose reverse mortgages generally have low costs, but they are not available everywhere, and they can be used for one purpose specified by the government or nonprofit lender.
Proprietary mortgages and HECMs tend to be more costly and are widely available — and carry higher upfront costs to homeowners.
In the HECM program, a borrower can live in a nursing home or other medical facility for up to 12 months before the loan becomes due and payable.
There are several features of a reverse mortgage to consider, including the following:
• Lenders generally charge origination fees and other closing costs for a reverse mortgage. Lenders may also charge servicing fees during the term of the mortgage. The lender generally sets these fees and costs.
• The amount owed on a reverse mortgage usually grows over time. Interest is charged on the outstanding balance each month and added to the amount owed.
• Reverse mortgages may have fixed or variable rates. Most have variable rates that will likely change.
• Reverse mortgages can use up all or some of the equity in your home, leaving fewer assets for you and your heirs. A “nonrecourse” clause in most reverse mortgages prevents either you or your estate from owing more than the value of your home when it is repaid.
• Owners retain titles to their homes and remain responsible for property taxes, insurance, utilities, fuel, maintenance and other expenses.
• Interest on reverse mortgages is not deductible on income tax returns until the loan is paid off in part or in full.
• For homeowners at least 62 years old, a reverse mortgage can be used to generate funds to prevent the foreclosure of a regular mortgage.
Packer said anyone considering a reverse mortgage should try to use a local lender or one of the larger, well-known banks, such as Bank of America or Wells Fargo.
She also said to make sure the appraiser is familiar with property values in Graham or Greenlee counties, and does the appraisal with local criteria in mind.
SouthEast Arizona Governments Organization, headquartered in Bisbee, offers reverse mortgage counseling at no charge, said Julie Packer, the organization’s housing programs administrator. A SEAGO counselor will counsel homeowners at their residences. There is no need to travel to Bisbee for this service.
Packer said reverse mortgages are for senior citizens who have paid off or nearly paid off their regular mortgage.
“It’s not for everyone, though,” Packer said. “It’s kind of like home ownership. Home ownership is not for everyone.”
According to the FTC, reverse mortgage loan advances are not taxable and usually do not affect Social Security or Medicare benefits. Owners retain titles to their homes and are not required to make monthly repayments.
The loan must be repaid when the last surviving borrower dies, sells the home or no longer lives in the house as a principal residence.
There are three types of reverse mortgages: Single-purpose, which are offered by some state and local government agencies and nonprofit organizations; home equity conversion mortgages, known as HECM, which are federally insured, and proprietary reverse mortgages, which are private loans that are backed by the companies that develop them.
Single-purpose reverse mortgages generally have low costs, but they are not available everywhere, and they can be used for one purpose specified by the government or nonprofit lender.
Proprietary mortgages and HECMs tend to be more costly and are widely available — and carry higher upfront costs to homeowners.
In the HECM program, a borrower can live in a nursing home or other medical facility for up to 12 months before the loan becomes due and payable.
There are several features of a reverse mortgage to consider, including the following:
• Lenders generally charge origination fees and other closing costs for a reverse mortgage. Lenders may also charge servicing fees during the term of the mortgage. The lender generally sets these fees and costs.
• The amount owed on a reverse mortgage usually grows over time. Interest is charged on the outstanding balance each month and added to the amount owed.
• Reverse mortgages may have fixed or variable rates. Most have variable rates that will likely change.
• Reverse mortgages can use up all or some of the equity in your home, leaving fewer assets for you and your heirs. A “nonrecourse” clause in most reverse mortgages prevents either you or your estate from owing more than the value of your home when it is repaid.
• Owners retain titles to their homes and remain responsible for property taxes, insurance, utilities, fuel, maintenance and other expenses.
• Interest on reverse mortgages is not deductible on income tax returns until the loan is paid off in part or in full.
• For homeowners at least 62 years old, a reverse mortgage can be used to generate funds to prevent the foreclosure of a regular mortgage.
Packer said anyone considering a reverse mortgage should try to use a local lender or one of the larger, well-known banks, such as Bank of America or Wells Fargo.
She also said to make sure the appraiser is familiar with property values in Graham or Greenlee counties, and does the appraisal with local criteria in mind.
Sunday, April 19, 2009
A Guide to Investing for College Students
Investing for beginners is easier than ever before. With access to the stock market as close as your keyboard, you're just clicks away from getting started. Just learn the basics and find the right online tools to help you, and you'll be on your way.
The first concept to get to know in beginner investing is compound interest. The same principles of interest that can keep you in debt when you're trying to manage your credit work to your advantage when you invest money. Simply put, it means that the interest you make on an investment is added to your original investment and then reinvested to make even more interest. It's not as complicated as it sounds.
Here's a simplified example. An original investment of $100 with a return rate of 10% that's compounded yearly would make $10 in interest in year one for a total balance of $110. In year two if that $110 achieves the same 10% yield, it would add an additional $11 to the total. Continue to let the money compound over the next 18 years at 10% annually and by the 20th year it would be $672.75. But let it continue to compound for 30 or 40 years and it would grow to $1,744.94 and $4,525.93 respectively. All that without adding any additional money. Wow!
If you've determined that investing is right for you, you should look for an online discount stock brokerage or other financial services company that allows you to open an account with a low minimum balance, or none at all. The company you choose should offer low maintenance and trade fees, while providing you with tracking and investment management tools so that you can easily keep an eye on your investments. But before you sign up, you should know some basic investment terms and products.
There are many other definitions and concepts that you should have a working knowledge of as a beginner investing for the first time. These include:
* 401K - A company-sponsored retirement plan that allows you to contribute pre-tax dollars. 401Ks shelter your interest earnings as you continue to work, so that you'll only be taxed when you retire and withdraw money. 401Ks help to reduce your taxable income each year, saving you money on federal, state and local income taxes
* Bond - When corporations and governments borrow money from investors they are given a bond. The borrower in this case agrees to pay the investor the price of the original 'loan' plus interest at a predetermined later date
* Capital gain/capital loss - The money made or lost from an investment
* Certificate of Deposit (CD) - Typically a bank-issued document that guarantees an investor a specific yield on an amount of money when 'lent' to the bank for a pre-determined period of time. CD terms range from a month to several years
* Diversification - Making investments in different types of funds to help distribute your risk. Some funds are diversified in themselves, and could for instance include stocks from biotech, telecommunications, banking, entertainment and food manufacturing companies
* Individual Retirement Account/IRA - A retirement account that provides tax-deferral or other tax benefits
* Interest - The amount paid by a borrowing party for use of a lender's money. With credit cards you are the borrower, with investments you are the lender
* Mutual fund - A financial product that is managed and marketed by an investment company and can be comprised of stocks, bonds, or other securities products. The investment company pools investor contributions to buy and sell stocks and bonds for the entire group
* SEC/Securities and Exchange Commission - The governmental regulation agency that was established to help protect investors and oversees participants and activities in the world of securities
* Securities - Any type of investment product like a stock, bond, note, etc.
* Stock - A certificate or share of ownership in a corporation
* Trader - One who buys and sells securities like bonds, stocks, etc.
* Yield - The return on an investment as a percentage
If you grasp these investing for beginners basics, you can be investing in no time. Sure growing your investments may take time, but the returns will be well worth the wait.
The first concept to get to know in beginner investing is compound interest. The same principles of interest that can keep you in debt when you're trying to manage your credit work to your advantage when you invest money. Simply put, it means that the interest you make on an investment is added to your original investment and then reinvested to make even more interest. It's not as complicated as it sounds.
Here's a simplified example. An original investment of $100 with a return rate of 10% that's compounded yearly would make $10 in interest in year one for a total balance of $110. In year two if that $110 achieves the same 10% yield, it would add an additional $11 to the total. Continue to let the money compound over the next 18 years at 10% annually and by the 20th year it would be $672.75. But let it continue to compound for 30 or 40 years and it would grow to $1,744.94 and $4,525.93 respectively. All that without adding any additional money. Wow!
If you've determined that investing is right for you, you should look for an online discount stock brokerage or other financial services company that allows you to open an account with a low minimum balance, or none at all. The company you choose should offer low maintenance and trade fees, while providing you with tracking and investment management tools so that you can easily keep an eye on your investments. But before you sign up, you should know some basic investment terms and products.
There are many other definitions and concepts that you should have a working knowledge of as a beginner investing for the first time. These include:
* 401K - A company-sponsored retirement plan that allows you to contribute pre-tax dollars. 401Ks shelter your interest earnings as you continue to work, so that you'll only be taxed when you retire and withdraw money. 401Ks help to reduce your taxable income each year, saving you money on federal, state and local income taxes
* Bond - When corporations and governments borrow money from investors they are given a bond. The borrower in this case agrees to pay the investor the price of the original 'loan' plus interest at a predetermined later date
* Capital gain/capital loss - The money made or lost from an investment
* Certificate of Deposit (CD) - Typically a bank-issued document that guarantees an investor a specific yield on an amount of money when 'lent' to the bank for a pre-determined period of time. CD terms range from a month to several years
* Diversification - Making investments in different types of funds to help distribute your risk. Some funds are diversified in themselves, and could for instance include stocks from biotech, telecommunications, banking, entertainment and food manufacturing companies
* Individual Retirement Account/IRA - A retirement account that provides tax-deferral or other tax benefits
* Interest - The amount paid by a borrowing party for use of a lender's money. With credit cards you are the borrower, with investments you are the lender
* Mutual fund - A financial product that is managed and marketed by an investment company and can be comprised of stocks, bonds, or other securities products. The investment company pools investor contributions to buy and sell stocks and bonds for the entire group
* SEC/Securities and Exchange Commission - The governmental regulation agency that was established to help protect investors and oversees participants and activities in the world of securities
* Securities - Any type of investment product like a stock, bond, note, etc.
* Stock - A certificate or share of ownership in a corporation
* Trader - One who buys and sells securities like bonds, stocks, etc.
* Yield - The return on an investment as a percentage
If you grasp these investing for beginners basics, you can be investing in no time. Sure growing your investments may take time, but the returns will be well worth the wait.
Thursday, April 16, 2009
How to Save Money When You Have None
Learning how to save money when you have none may seem like an impossible task, but we Save is here to help.
Set Manageable Goals
The key to learning how to save money when you have none is to think small. If you're struggling to keep a roof over your head and food on the table, planning for retirement or saving for a child's college education probably seems like an impossible goal. Focus on finding more manageable ways to save money. For example:
* Set a goal of cutting $10 per week from your budget. This can be accomplished by taking the bus instead of driving to work, eliminating a trip to a fast food restaurant, clipping coupons, or checking out movies from the public library instead of going to the video store. Once a week, make a trip to the bank to deposit the $10 in your savings account.
* Empty the spare change from your pockets into a jar whenever you walk through the door. When the container is full, add it to your savings account.
* Have a garage sale, take old items into a consignment shop, or sell collectibles on eBay.
* Spend an afternoon collecting cans from the side of the road to return for the deposits.
* Look for ways to earn extra money to give yourself a bit of a financial cushion. Babysitting or doing yard work for people in your community is a great idea. LoveToKnow Business also has a number of suggestions in the article,Home Based Businesses for Under $ 100.
Ask for Help Learning How to Save Money When You Have None
If you're struggling, there's no shame in asking others for help. Don't let foolish pride keep you from making the most of a bad situation. You can always repay the favor after your financial situation improves.
If you're in need of food assistance, consider the following resources:
* Angel Food Ministry allows people in any income bracket to purchase boxes of deeply-discounted groceries once per month. The basic box contains enough food to feed a family of four for one week.
* Pregnant women in a low-income bracket and those with children under the age of five can get milk, juice, cereal, and other necessities through WIC. The program also offers nutrition advice, free dental screenings, and assistance with family planning needs.
* The Supplemental Nutrition Assistance Program allows people with low incomes to purchase the food they need. You do not need to be married or have a child to qualify.
* If you're really in a bind, community food pantries provide temporary assistance with groceries. In most cases, all you need to receive help is proof of your legal address.
* If you have children in school, they may be eligible for free or reduced-price meals. Some schools also have programs that allow kids to sign up for a bag of groceries to take home on the weekends.
Other forms of assistance for how to save money when you have none include:
* Medicaid provides medical insurance for low income individuals and families who fit into an eligibility group that is recognized by federal and state law.
* The State Children's Health Insurance Program (SCHIP)offers coverage for children in families that earn too much for Medicaid, but not enough for private insurance.
* The Find a Health Center site can help you locate a clinic with a sliding scale fee system if you are uninsured and don't qualify for Medicaid or SCHIP coverage.
* Wal-Mart's $4 prescription program can help you pay for some of the medications you need, regardless of your income. Many other stores also have similar programs.
* LIHEAP provides assistance with heating costs during the winter months.
* Toys for tots provides Christmas gifts for needy children.
Set Manageable Goals
The key to learning how to save money when you have none is to think small. If you're struggling to keep a roof over your head and food on the table, planning for retirement or saving for a child's college education probably seems like an impossible goal. Focus on finding more manageable ways to save money. For example:
* Set a goal of cutting $10 per week from your budget. This can be accomplished by taking the bus instead of driving to work, eliminating a trip to a fast food restaurant, clipping coupons, or checking out movies from the public library instead of going to the video store. Once a week, make a trip to the bank to deposit the $10 in your savings account.
* Empty the spare change from your pockets into a jar whenever you walk through the door. When the container is full, add it to your savings account.
* Have a garage sale, take old items into a consignment shop, or sell collectibles on eBay.
* Spend an afternoon collecting cans from the side of the road to return for the deposits.
* Look for ways to earn extra money to give yourself a bit of a financial cushion. Babysitting or doing yard work for people in your community is a great idea. LoveToKnow Business also has a number of suggestions in the article,Home Based Businesses for Under $ 100.
Ask for Help Learning How to Save Money When You Have None
If you're struggling, there's no shame in asking others for help. Don't let foolish pride keep you from making the most of a bad situation. You can always repay the favor after your financial situation improves.
If you're in need of food assistance, consider the following resources:
* Angel Food Ministry allows people in any income bracket to purchase boxes of deeply-discounted groceries once per month. The basic box contains enough food to feed a family of four for one week.
* Pregnant women in a low-income bracket and those with children under the age of five can get milk, juice, cereal, and other necessities through WIC. The program also offers nutrition advice, free dental screenings, and assistance with family planning needs.
* The Supplemental Nutrition Assistance Program allows people with low incomes to purchase the food they need. You do not need to be married or have a child to qualify.
* If you're really in a bind, community food pantries provide temporary assistance with groceries. In most cases, all you need to receive help is proof of your legal address.
* If you have children in school, they may be eligible for free or reduced-price meals. Some schools also have programs that allow kids to sign up for a bag of groceries to take home on the weekends.
Other forms of assistance for how to save money when you have none include:
* Medicaid provides medical insurance for low income individuals and families who fit into an eligibility group that is recognized by federal and state law.
* The State Children's Health Insurance Program (SCHIP)offers coverage for children in families that earn too much for Medicaid, but not enough for private insurance.
* The Find a Health Center site can help you locate a clinic with a sliding scale fee system if you are uninsured and don't qualify for Medicaid or SCHIP coverage.
* Wal-Mart's $4 prescription program can help you pay for some of the medications you need, regardless of your income. Many other stores also have similar programs.
* LIHEAP provides assistance with heating costs during the winter months.
* Toys for tots provides Christmas gifts for needy children.
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