Loan Origination Fees
Most people choose a Home Equity Conversion Mortgage (HECM) – the are federally insured and are the most widely available reverse mortgage. On HECM loans, there is a 2% origination fee on the first $200,000 and then 1% on the value after that with a cap of $6000.

Non-HECM reverse mortgage loans are available that may have lower origination fees. The key with comparing loans is to look at the total cost. One loan may have lower origination fees but a higher interest rate which means a higher overall reverse mortgage cost.

Mortgage Insurance
With an HECM loan, borrowers are also responsible for mortgage insurance which typically runs 2% of the value of the home. There is also an annual mortgage insurance premium that must be paid and is usually half a percent per year. The mortgage insurance guarantees that the amount of your loan will not exceed the value of your home when your mortgage comes due.

Title Insurance, Appraisals and other Closing Costs
Another similarity between traditional mortgages and reverse mortgages are the additional closing costs. Reverse mortgage closing costs include title insurance, a new appraisal, document preparation fees and possibly an inspection if your home is particularly old or it’s condition is questionable. All of these costs will usually run about a percent or two of the home’s value.

Interest Rate
Just like a traditional mortgage, the interest that you pay over the life of the loan will be your largest reverse mortgage cost. The total cost that you will pay will depend on your interest rate, the amount that you borrow and the length of your loan. On an HEMC mortgage, which is the most common type of reverse mortgage, you can choose between an adjustable rate mortgage that adjusts either monthly or annually and is tied to the 1 Year US Treasury Constant Maturity Rate which fluctuates weekly. For these types of loans the rate is generally the 1-Year Treasury rate plus a percent and a half.

Other reverse mortgage programs offer similar programs where the rate is tied to a particular index (not always the 1-Year Treasury index) with a margin of up to 4% added. Shopping around for the best deal is crucial to finding the best reverse mortgage loan.

Reverse mortgages can be a significant benefit to seniors who are looking to use the equity in their home to pay for the cost of living, medical bills or other expenses. However, reverse mortgage costs must be taken into consideration. Loan origination fees, mortgage insurance and reverse mortgage closing costs can meet or exceed 5% of the total value of the home being borrowed against, and that doesn’t even include the interest rate. With the information we’ve provided in this article you are now aware of the reverse mortgage costs you are likely to encounter. Hopefully this information will benefit you in your search for a reverse mortgage that will meet your needs.

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High Reverse Mortgage Costs
One of the larger pitfalls of a reverse mortgage are the high fees. Fees for reverse mortgages are based on the value of your home, which is different from traditional mortgages where the fees are based on the loan amount. Most reverse mortgages sold are federally insured and known as a Home Equity Conversion Mortgage (HECM). For an HECM mortgage, origination fees alone are usually 2% of the home’s value, and then there is the mortgage insurance premium of 2%. By the time you add an appraisal, title search, title insurance, and other reverse mortgage closing costs the total loan fees can reach 5% or more of the home’s value.

Loan Caps
Since HECM mortgages are backed by the government, they have instituted a limit on the amount that you can borrow. These limits range from just over $200,000 to $417,000 depending on where you live.  So even if your home is worth more than $417,000 the maximum amount the government will allow you to borrow will be limited.

There are non-government insured reverse mortgages available, but just like an HECM, the closing costs are high. The benefit to non-government reverse mortgages is that there is no loan cap and in some instances you can avoid the mortgage insurance premiums.

Equity is Required
Although you do not have to own your home free and clear to obtain a reverse mortgage, you do need to have equity. Although there are some traditional mortgages on the market that allow you to borrow more than your home is worth, that is not the case for reverse mortgages.

Negative Impact on Medicaid
Often overlooked, the impact a reverse mortgage can have on Medicaid is one of the scarier reverse mortgage pitfalls. According to the National Reverse Mortgage Lenders Association, a reverse mortgage that is paid out in a lump-sum can impact Medicaid benefits. In order to avoid this significant reverse mortgage pitfall, the lender needs to ensure that none of the lump sum amount is remaining the month after it is received. Otherwise the remaining amount can count as a resource and will impact Medicaid eligibility.

Age Requirements

Another drawback to obtaining a reverse mortgage is the age requirement. You must be 62 or older to qualify for this type of mortgage. If the home is owned by 2 or more people, all owners must be over the age of 62.
Reverse mortgages are increasing in popularity among senior citizens who are looking to use the equity in their home to pay for medical bills and other expenses. However there are many reverse mortgage pitfalls that need to be carefully considered before taking out such a loan. High closing costs, loan caps and Medicaid considerations as well as equity and age requirements all need to be balanced against the need for income. Hopefully this article has provided some insight into the pitfalls of reverse mortgages and will help you make an informed decision.

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DRIPs are offered by nearly every corporate firm.  By offering a dividend reinvestment program, a company allows people to buy shares in the company directly from the company itself rather than on the open market.  In most cases, you are able to buy stock from the company at a discount (sometimes a very significant one) compared to buying the stock on the open market.  Additionally, with a DRIP you can set up direct deposit style withdrawals from a banking or checking account in order to buy a small amount of stock each month.  On top of that, when you are enrolled in a DRIP investment, any dividends that the company issues are used to buy more shares of the stock rather than the standard method of a check.

Why use a DRIP?

Together, the discount on share price, monthly purchasing, and the reinvestment of dividends allows you to build up a large position in a company’s stock in a relatively short period of time.  Most people who are enrolled in a DRIP find that they hold a very large number of shares before they even realize that they have been building a position over time.  A DRIP also does not require a great deal of effort or attention in order to build a sizable number of shares owned.  In fact, DRIP investing is one of the best ways to invest if you are not a person who enjoys watching the monthly ups and downs of the market.

How to Enrol in a DRIP:

The most common form of DRIP is an employee DRIP.  That is, if you work at a company whose stock is on the open market, it is usually possible to enroll yourself in your company’s DRIP, particularly if part of your compensation is in the form of stock and options.  You can specify that a certain portion of your paycheck be used to build your position through your DRIP, and in some cases a company will match a certain portion of your contribution every month.  An employee DRIP is a wonderful way to earn money beyond your base salary.

The other form of DRIP is a stockholder DRIP.  To enroll in one of these programs, you must hold a certain number of shares in a company before you are allowed to enroll.  Most firms, however, set this minimum at one share.   Once you are a shareholder, setting up a DRIP is as easy as contacting the firm’s investor relations department and asking about their dividend reinvestment program.  Since most companies handle the specifics of their program differently, it is impossible to offer individualized advice on this matter.  However, in most cases you will be asked to transfer your currently held shares from your brokerage to the company itself and/or its transfer agent.  Should you decide to enroll in a firm’s DRIP, you should strongly consider allowing them to debit your checking or savings account for a set amount of dollars each month.  There are numerous benefits to this:

1. You will be forced into a sound investment strategy.  When you buy a certain dollar amount of shares each month, you automatically buy more shares when the price is low and less shares when the price is high.  Additionally, you will be forcing yourself to think on a longer-term basis.  When you buy shares each month, you are less tempted to look for cheap or easy gains.
2. You will be saving money without having to make a conscious decision each month.  One of the hardest parts of actually saving money is actually making the decision to do so. When the decision is made automatically for you, you have no choice but to make the right decision.
3. You will build a very large position over time.  Most people buy and sell shares in large chunks and wonder why they are unable to build consistent positions.  Automatically purchasing shares in a company each month is an effective way to build a huge position.
4. Dividend reinvestment programs are one of the open secrets of stock market success.  The investing public is generally unaware of these programs, but savvy investors take full advantage.

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Why use fixed asset accounting?

Companies that properly utilize fixed assets accounting receive a number of tax benefits, primarily in the form of depreciation, which can significantly reduce a firm’s total tax liability at the end of the business cycle.  Additionally, the use of fixed assets makes expense accounting very simple and predictable in the future.  By properly accounting for your assets, your company will save a great deal of money and headaches over the long run.

Determining the ‘cost’ of a fixed asset

The declarable depreciation of a fixed asset depends on its initial cost, so it is important to get this number right.  Including the price you pay for your fixed asset, you should also include delivery costs, installation costs (including time spent and labor), and an estimate for the labor and materials required to dismantle and sell or destroy the item at a later date.  It is not advised that you inflate you’re your accounting of the cost, but at least be aware that the cost of your fixed asset will usually be well in excess of its purchase price.

Determining depreciation expenses

Each company handles depreciation a little differently, but for the most part, standard accountancy dictates that you use a fixed depreciation schedule.  For example, the standard computer will be economically viable for three years before it will need to be replaced or significantly upgraded.  Because the life of a computer is relatively predictable, you are able to classify it as a fixed asset and depreciate it in a straight line—that is, each year, you will charge one third of the computer’s value as an expense.  This expense will count as a standard expense against your revenue, and the computer’s net asset value will decrease by the corresponding depreciation amount. Given the complexity involved in depreciating multiple items, fixed asset accounting software can be a valuable tool for larger business entities.

By treating these types of assets as fixed assets, you will be able to accurately and legally determine the value of your assets, have a very predictable and easy to determine expense schedule, and reduce your overall tax liability.  There are a number of guides and books that detail exactly how to account for every conceivable type of fixed asset.  While there are more advanced forms of fixed asset accounting, opting to use the simplest method is generally the best for small business owners or sole proprietors.

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Since this is the case, it is, to be frank, unlikely that you will be able to get a personal loan if you have poor credit or insufficient income.  However, there are a few things you can do to significantly increase the chances of receiving one:

Bank locally

It is something of a well hidden secret in the world of personal finance, but you should always get checking and savings accounts and credit cards from local banks or credit unions rather than large multi-national organizations.  Not only will you get much better customer service (at the cost of things like 24 hour call centers based in India), but you will be able to build a relationship with the people who make up the organization, who are ultimately the people that decide whether you receive a loan.  You are astronomically more likely to receive an irregular loan such as a personal loan through a local bank with whom you have a relationship than a national bank.  A local bank will still check your credit, but they are much more willing to overlook a poor credit report or let you explain some of the factors leading to your poor credit score.

Offer up collateral

If you’re seeking a personal loan, you significantly increase your chances of receiving it if you can put down a deposit.  This is another advantage to banking locally.  While your local bank isn’t in the pawn shop business, they are much more likely to accept irregular forms of collateral like valuable musical instruments or jewelry than a national bank.  Some amount of money, counter-intuitive as it may seem, can also act as collateral for your loan.

Always work on improving your credit

Secured credit cards and secured personal loans are amazing ways to boost your credit score.  You can use the proceeds from one secured loan to fund another secured loan.  You will have to pay a small amount of interest on these loans, but they are reported to the credit bureaus as if they are real loans.  If you have some spare cash lying around, it would behoove you to get started improving your credit today.  Having a positive credit history significantly increases the chances you will receive a bad credit personal loan.

One last mention:  Debt consolidation loans are one example of personal loans that are issued more freely than others.  If you have bad credit and are seeking to consolidate your debt, you may wish to go through a consolidation firm rather than seek a plain personal loan.

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Reverse mortgages are typically only available to seniors. Reverse mortgages are products specifically intended to give income or cash to a person at the end of their life.

There are caps on the value of reverse mortgages. Most countries have some type of cap on money payable on a reverse mortgage.  This is not a concern for most home owners as the cap is in excess of their home’s property, but can seriously affect people who own valuable homes.

It is difficult to predict the worth of a reverse mortgage. Because the approximate value of the mortgage depends literally on how long it takes until you die, it is difficult (and can be emotionally painful) to determine the value of a reverse mortgage.

With all of that said, there are some very definite reverse mortgages pros and cons:

Pros

A reverse mortgage provides much-needed income to a person at the end of their life.  Many people own their home outright but do not have significant savings to cover the costs of retirement.  A reverse mortgage can provide the funds needed to live comfortable at the end of your life.

A reverse mortgage can provide more money and be more comfortable than selling your home and buying a smaller place or renting. Most seniors express little or no desire to move, and a reverse mortgage may be the answer to being able to stay in your home for the rest of your life.

Cons

A reverse mortgage can end up being expensive. Though there are typically no costs for a reverse mortgage, interest (yes, the bank does charge you interest), up front fees, and broker percentages can mean you get much less money than you anticipate.  Additionally, if you wish to receive a lump sum payment rather than fixed income, the bank will apply a steep discount to the funds available.  It does not hurt to consider a reverse mortgage, but if the terms are unacceptable to you there are always other options.

You will lose ownership of your property.  Receiving a reverse mortgage means you will transfer ownership of your property to the bank once you move or die.  If you were planning on leaving your home to your children, this is quite obviously a problem.

Ultimately, you will have to make a decision based on your own unique situation.  There is no sense on sitting on your home’s equity near the end of your life, but a reverse mortgage will not always be the ideal option.

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Bankruptcy is misunderstood in most western countries.  While there is significant stigma attached to bankruptcy, most people are not aware that , for people who already have poor credit or are seriously behind on bill payments, bankruptcy is typically very helpful and beneficial in the long run.   Additionally, bankruptcies that are filed in times of national economic stress, as in the period beginning with 2006 and still ongoing, are often ignored or greatly discounted by lenders years down the line.  With that said, let’s go through the bankruptcy process.

Determine if you are a good candidate for bankruptcy

There are generally two types of bankruptcies:  liquidation and reorganization.  The vast majority of people are much better off under a liquidation bankruptcy.  People who qualify for a liquidation generally have few or non-exempt assets, have multiple outstanding, delinquent debts, and lack the income to ever be able to catch up on the debts.  Asset exemptions vary depending on your country or state, but generally include things like furniture, primary vehicle, cooking ware, and personal or sentimental valuables.

People who qualify for a reorganization bankruptcy typically have a very high income or significant assets and crushing debt.  If you think you qualify for a reorganization bankruptcy rather than a liquidation, there is no general purpose guide that you should consult; instead, you should stop reading and consult a bankruptcy specialist or lawyer right away.  Be advised that a reorganization bankruptcy can be extremely expensive.

If you think you are a candidate for a liquidation bankruptcy, begin taking account of your debts

There are certain debts and payments that cannot be discharged by bankruptcy.  These include student loans, child support or alimony payments, and debt payments related to secured loans (typically auto or home loans).  If you believe you may have to file for bankruptcy in the future, you should begin to focus on paying down non-dischargeable debts.  Additionally, you may want to calculate whether you have enough debt for a worthwhile bankruptcy.  If you only have a few thousand dollars of outstanding debt, there may be other options such as consolidation loans or credit card balance transfers that may allow you to avoid bankruptcy permanently or, at the least, for some time.  Under no circumstances, though, should you utilize cash advances on credit cards or take out loans for the express purpose of paying down non-dischargeable debts.  If you have done this far in the past it is no problem, but if you do it any time in a six-month period before declaring bankruptcy, many countries consider you to have committed bankruptcy fraud.

How to file for bankruptcy

Once you’re confident you’re a good bankruptcy candidate, all it takes is going to a bankruptcy attorney. Liquidation bankruptcies are standard practice for a number of lawyers and can be done for as little as a few hundred dollars.  You can only file bankruptcy once every few years, so it’s important that you make it worthwhile.  Don’t file bankruptcy over frivolous or negligible debts, as you will be needlessly damaging your credit score as well as making yourself ineligible for bankruptcy in the ensuing years.

For the vast majority of people, bankruptcy protection is immensely beneficial and will immediately make debts more easily manageable and reduce overall stress levels.  It is also possible to “re-affirm” secured loans such as auto loans and mortgages through bankruptcy.  Don’t let anybody tell you that you will necessarily lose your house or car in a bankruptcy.

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