Posts Tagged ‘interest rates’

Start Saving When You Are Young: You Can Always Spend the Money Later

June 7th, 2011

Saving money doesn’t have to be complicated
I swelled with pride when my 19 year old grandson told me he had opened a savings account and of course I made a donation to start it rolling. This marks his arrival at adulthood, I thought. He has no debts either.

Income-based repayment plans
That’s the concern for Brandon Smith, who recently graduated with a degree in journalism together with $98,000 in student loans. NPR asked personal finance expert Beth Kobliner what advice she might give Smith and other young adults. And she started her answer with one practical point. “There’s something called income-based repayment plans,” Kobliner tells Morning Edition host Steve Inskeep. “So, basically you pay back your loans as a percentage of income, and after 20 years, if you’re going into a relatively low-income job, your loans disappear completely.” Another idea is for students to consider debt when they’re looking at colleges and fields of study, says Kobliner, the author of Get a Financial Life.

Start Early
There have been several initiatives to teach financial literacy to young people. But it can be hard for students to find time for the programs and to absorb what they teach. “You can be in information overload and you say, ‘There is so much out there. I have no idea where to turn, so I’m just going to ignore it all,’ “Kobliner says. And while new technology, like budget-tracking software, can help, it doesn’t guarantee better results.

Back to basics
“I think we have to go back to basics,” Kobliner says. “We have to look at the very old-fashioned notions of, ‘Hmm … we shouldn’t spend more money than you have.’ “
She says that another thing to keep in mind when researching options for saving and investing is where all of the data come from. “Is it being sponsored by a bank?” Kobliner asks. “Is the website that’s offering it to you getting money back from what you’re clicking on?”

Forget about calculating
Don’t worry so much about learning how to compute interest, or amortization. “You just have to know that, ‘Gee, I want to pay 5 percent rather than 10 percent,’” she says.

Retirement
Another thing young workers should begin planning is their retirement. And Kobliner says they should start when they’re 21. “I think that sounds frightening to some,” she admits. “As soon as you have even a little bit of money, I’m a real advocate of putting money into something called a Roth IRA,” Kobliner says. “And, if you need it, the money you put in, in an emergency, you can get it out.”

Save, save, save
The key to saving whether for an emergency, or for retirement, she says, is “basically, starting as early as possible.” If you never need the money you saved when young, that’s great. But if you do need some extra cash in midlife for some unforeseen emergency, it will be there. Saving is a win-win deal!

Tags: Debts, Emergency cash, interest rates, Retirement, Savings
Posted in Economy, Employment, Finance, Money | No Comments »

All About Reverse Mortgages

April 14th, 2011

Your house is mortgagee free and you are desperately short of cash. Here’s a plan
There is a reverse mortgage program which enables you to withdraw some of the equity in your home. The HECM is a safe plan that can give older Americans greater financial security. Many seniors use it to supplement social security, meet unexpected medical expenses, make home improvements and more. You can receive additional free information about reverse mortgages in general by contacting the National Council on Aging at (800) 510-0301 or downloading their free booklet, “Use Your Home to Stay at Home,” a guide for older homeowners who need help now.

What is a reverse mortgage?
A reverse mortgage is a special type of home loan that lets you convert a portion of the equity in your home into cash. The equity that built up over years of home mortgage payments can be paid to you. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence or fail to meet the obligations of the mortgage.

How do I qualify?
To be eligible for a FHA HECM, the FHA requires that you be a homeowner 62 years of age or older, own your home outright, or have a low mortgage balance that can be paid off at closing with proceeds from the reverse loan, and you must live in the home. You can find a HECM counselor online or by phoning (800) 569-4287.

What types of homes are eligible?
To be eligible for the FHA HECM, your home must be a single family home or a 1-4 unit home with one unit occupied by the borrower. HUD-approved condominiums and manufactured homes that meet FHA requirements are also eligible.

What’s the difference between a reverse mortgage and a bank home equity loan?
The reverse mortgage pays you and is available regardless of your current income. The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home, sales price or FHA’s mortgage limits, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you may borrow.

When does my loan become due and payable?
When you die or sell the home. The loan also becomes due and payable if you default in any way.

Will I still have an estate that I can leave to my heirs?
When you sell your home, you or your estate will repay the cash you received from the reverse mortgage plus interest and other fees, to the lender. The remaining equity in your home, if any, belongs to you or to your heirs.

How much money can I get from my home?
This depends on:
The age of the youngest borrower, current interest rate, appraised value of your home, and the HECM FHA mortgage limit for your area or the sales price. The more valuable your home is, the older you are, and the lower the interest rate, the more you can borrow.

Should I use an estate planning service to find a reverse mortgage?
FHA does NOT recommend using any service that charges a fee for referring a borrower to an FHA lender. FHA provides this information free, and HECM housing counselors are available for free or at very low cost, to provide information, counseling, and a free referral to a list of FHA-approved lenders. Search online or call (800) 569-4287 toll-free, for the name and location of a HUD-approved housing counseling agency near you.

How do I receive my payments?
You have five options:
Tenure – equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
Term – equal monthly payments for a fixed period of months selected.
Line of Credit – unscheduled payments or installments, at times and in amounts of your choosing until the line of credit is exhausted.
Modified Tenure – combination of line of credit with monthly payments for as long as you remain in the home.
Modified Term – combination of line of credit plus monthly payments for a fixed period of months selected by the borrower.

Tags: borrowing, interest rates, raising money urgently, Reverse mortgage
Posted in Finance, Loans, Mortgage | No Comments »

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