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Mortgage Services
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My mother once told me that a penny saved is a penny earned. Well I never considered my mother's pennies to be of much value, but one day I realized that all of those pennies can add up, and I understood that perhaps my mom wasn't just talking about individual copper coins, and that there was a bigger picture. In business, the bottom line is important, and it's not how much you make, but how much you have left over after you deduct the expenses from the earnings. So every dollar I could save means one more dollar I could earn. That makes sense.
I've learned to apply this thinking to other parts of my own personal finance, because I haven't found too many ways where I can improve how much I earn, but there are always ways I can think of to reduce how much I spend, and so my mom's advice comes into play whether it's when I'm shopping, paying bills, or finding other ways to save. One time, when work was slow, I had to make a decision about not paying a bill, and paying it with a credit card or getting a loan or a cash advance from a payday loan business. It was going to cost me one way or the other, but when I applied my mother's principles I decided that the cash advance made slightly better sense, in that I would prevent an unnecessary interest payment that would have outweighed the service charges.
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Reverse Mortgages
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The cost of getting a reverse mortgage from a private sector lender may exceed the costs of other types of mortgage or equity conversion loans. Exact costs depend on the particular reverse mortgage program the borrower acquires. For the most popular type of reverse mortgage in the U.S., the FHA-insured Home Equity Conversion Mortgage (HECM), there is an insurance premium of 2% of the loan and a 2% origination fee in addition to normal closing costs, which are typically several thousand dollars, but vary depending on the third-party costs (appraisal fees, title searches, etc.) which must be undertaken. Thus a $200,000 loan would have $8,000 in costs beyond the normal closing costs added onto the loan at the outset. Other programs skip the insurance premium but still require the origination fees and closing costs, and some programs waive the initial costs if the borrower borrows all or most of the maximum amount he or she is eligible to receive. In addition, a monthly service charge (between $25 and $35) is usually added to the total amount of the loan. |
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Reverse Mortgages
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A reverse mortgage, also known as lifetime mortgage in the United Kingdom, is a loan available to seniors (62 and over in the United States), and is used to release the home equity in the property as one lump sum or multiple payments. The homeowner's obligation to repay the loan is deferred until the owner dies, the home is sold, or the owner leaves (e.g., into aged care).
In a typical mortgage the homeowner makes a monthly amortized payment to the lender; after each payment the equity increases within his or her property, and typically after the end of the term (e.g., 30 years) the mortgage has been paid in full and the property is released from the lender. In a reverse mortgage, the home owner makes no payments and all interest is added to the lien on the property. If the owner receives monthly payments, then the debt on the property increases each month.
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