Guest Post: Is a Reverse Mortgage Right for You?

With budgets getting so tight already this year, you may consider selling unused items, refinancing your home, or getting a reverse mortgage to increase your income. Before accepting a reverse mortgage offer, please consider the pros and cons. To help us understand a reverse mortgage, I present Kay Winders of badcreditloans.org, our guest post writer today. Thank you, Kay! ~ Tracy

Guest postMany seniors find that they spend the majority of their adult, working life paying off the mortgage on their home only to struggle to maintain the taxes and upkeep on their homes once they retire and are no longer making the same income.

For many, a reverse mortgage provides the answer they need to solve their financial difficulties, either for maintaining their homes or for taking care of other obligations that become difficult on a limited income. Or, it can just provide the money needed to truly enjoy retirement.

With a reverse mortgage, the bank pays out a loan based on the amount of equity you have in your home. The money can be paid out in a lump sum, issued in monthly payments, or given as a line of credit.  You retain the title to your home (and the responsibility for taxes and repairs), and the bank is paid back when you sell your home (or your heirs pay it back when you die).

Like any loan, it is important to evaluate all the pros and cons to determine if a reverse mortgage is the right choice for you. Here are a few factors that you should consider when making the decision:

Your Age

Banks consider your age when deciding whether to grant you the loan and what interest rate to charge you. The older you are, the more likely you are to be approved for a loan. That’s because you are likely to have more equity built into your home and because the bank will assume that it will be responsible for the monthly payout for a shorter amount of time.

How Much You Owe

To qualify for a reverse mortgage, you must own your home or be able to pay off the amount you owe at the time of closing on the reverse mortgage. The bank can’t pay you for a home that you don’t legally own outright. If you still have many years to go before you pay off your home, just wait until you are close enough to the finish line to pay off the rest while still profiting from the reverse mortgage.

The Value of Your Home

You will have to pay back the reverse mortgage when you sell your home — or your heirs will have to pay it off when you die. It’s important to consider trends in the real-estate market before you choose a reverse mortgage. If the market tanks in the next few years, the value of your home may plummet, and you may not be able to sell your home for what the bank paid you for it. If the value of your home drops, you may pass on big debts to your heirs.

Inheritance Plans

Many people want to leave their homes behind for their children or other family members as an inheritance. If you get a reverse mortgage on your home, you won’t own it outright anymore, and you will risk not being able to leave it to your heirs. Even if you don’t sell your home and pass it on to your heirs, they will be responsible for paying off the reverse mortgage when you pass, potentially saddling them with large debts.

A reverse mortgage is a great way to get the money you need during retirement to either provide an income stream or to fund your travels or other retirement projects. However, you should carefully consider these issues before deciding if a reverse mortgage is right for you and your family.

Question: Have you secured a reverse mortgage on your home? Tell us why it was the right decision for you in the comments!

Kay Winders is presently the resident writer for badcreditloans.org, where she researches the best way for people to pay off their debts without damaging their credit. In her spare time, she enjoys freelance writing, the beach, and gardening.

Home Ownership: Article Appraisals

Today, we will complete the ninth file slot in our accordion filing system as well as the home ownership category. (Insert excitable utterance here. 🙂 )

I began the ninth file opening last week with the personal articles insurance policy documents. The last item in this file slot is the set of appraisals for my bridal and engagement rings.

With our personal articles policy, the receipts for our point-and-shoot camera and our video camera suffices our insurance company’s requirements for replacement should I need to file a claim for one of these two items. The receipt for my rings, purchased 13 years ago, would not cover the replacement cost should I lose the entire set. Therefore, I have my ring set appraised approximately every 5 years.

Looking at the date of my last appraisal, I am now overdue for another appraisal. (Guess I have another item to add to my To Do List.)

When I get the new appraisal, I will request a second official document to submit to my insurance company. With the new appraisal, the replacement cost will be updated, the premium adjusted (if needed), and the insurance company will have pictures and measurements in their file.

My appraisal will be filed in this ninth file slot. I currently have 2 other appraisals from years 2000 and 2005. The new 2011 appraisal will be added to these paper clipped appraisals and housed behind the personal articles insurance policy documents which concludes the items in my ninth file slot.

If I had other valuable items covered through my personal articles policy, I would put additional appraisals here (i.e., collection: stamps, coins, baseball cards; other jewelry items; electronic equipment; etc.).

Project complete! All my credit reports/cards, personal, and home ownership documents have a home. Keeping these documents together in an organized system helps me in using time wisely. Retrieving these documents is direct, quick, and easy. Keep working on your filing system to save you money (replacing lost documents), energy (sorting through piles of paper), and time (searching for needed items).

Question: How is your document organizing going? I would love to hear about your progress, even if you are just beginning. You need to start somewhere. 🙂 Please leave a comment with your answer.

Home Ownership: Personal Articles Insurance Policy

We are making progress getting those important documents gathered, organized, and filed! Thus far, we have created a home for our credit report/credit card documents, personal documents, and now our home ownership documents.

Having filled 8 file slots, we are ready to address the ninth file opening from the front of the accordion file. My ninth file slot houses two additional sets of home ownership documents. The first set of paperwork is our personal articles insurance policy documents.

Description

If you are unfamiliar with this type of insurance and you have some valuable possessions, then consider this inexpensive type of policy. Per State Farm’s web site:

You may have more valuable possessions than you realize. Your Homeowners Policy [or Renter’s Insurance Policy] can provide some coverage, but with deductibles and limitations. A Personal Articles Policy can provide the additional coverage that you may need.

Some items the Personal Articles Policy may cover are:

  • Jewelry
  • Furs
  • Cameras
  • Musical Instruments
  • Silverware/Goldware
  • Golf Equipment
  • Fine Art (such as oriental rugs and paintings)
  • Collectibles
  • Sports Equipment
  • Computer Equipment

Coverage

Our personal articles policy was written back in 2004. We began our coverage by insuring my wedding and engagement ring set. Later, we added our cellular phones and our point-and-shoot camera. Then in 2008, State Farm cancelled all cellular phone coverage since too many individuals were losing their phones and upgrading to another model. We lost our coverage on our cellular phones, but then we purchased a video camera which we added to our policy.

Having the added insurance on these items assures a replacement if the item is lost or repairing charges if the item is damaged. Though we have not lost of any of the items, we did need to replace our first point-and-shoot camera. We took a trip by air. When we arrived at our destination, our camera case was cracked resulting in very dark pictures. When we returned home, we contacted our agent for instructions. We then did the following:

    1. Purchased a comparable model to our current broken camera. We ended up getting a better camera for less than we purchased the original because our exact model was no longer available for purchase.
    2. Took the old camera and new camera with receipt to our State Farm agent.
    3. Traded our old camera for a check in the amount of the new camera price, verified with the receipt.
    4. Removed the old camera from our personal articles policy and added the new camera.

The process was very easy, inexpensive, and worth our time and energy!

Cost

Your annual premium will depend on your insurance company’s rates and the value of the items you add to this policy. Our policy to cover my ring and our 2 cameras is $43 per year. Yeah! It’s only $43, and these items are fully insured. If we had not had this insurance when our camera broke, we would have spent much more than $43 to replace it.

In addition to saving us replacement costs for broken insured items, this policy also gives us an additional policy with State Farm. We receive premium discounts for having multiple insurance policies. For us, this policy pays for itself because our policies on our vehicles and home receive more of a discount than this policy cost.

With a very reasonable insurance policy, you can cover your valuable possessions. I highly recommend a personal articles policy for your peace of mind. Our policy continues to be worth our money, energy, and time!

Filing System

My personal articles paperwork consists of:

    • Original binder document
    • Documents indicating a change, addition, or deletion
    • Current policy
    • Receipt for the current annual premium

All of these documents are paper clipped together and housed in the ninth file slot of my accordion file under the category of home ownership documents.

If you have never heard of a personal articles policy, then I hope you have been informed from the description, coverage, cost, and filing system. Next week, I will share the second and last set of documents in this file slot which will complete the home ownership category. Keep up the document organization as you continue in using time wisely. Happy organizing! 🙂

Home Ownership: Appraisal

The time has come to complete another file slot in our important documents filing system. Are you doing a happy dance? Come on . . . getting organized is exciting stuff.

I love to be organized. When I cannot find something, I get in panic mode, and I really don’t like it. I must find the searched-for item until it is found. Thankfully, I don’t lose too many items, but staying organized helps me to use my time wisely.

In this series on home ownership (the third category of our filing system), we have placed in this eighth file opening our deed(s), insurance (homeowner’s or renter’s), property tax documents, property survey(s), and title insurance. The next and final item is our appraisal.

Now getting a copy of our appraisal was more difficult than I thought it would be. For some reason, our mortgage lender did not want to supply us with a copy. At the closing, we stopped signing the paperwork until the appraisal was given to us.

I still do not understand why the lender did not want us to have a copy of our appraisal. The payment for the appraisal was included in our closing costs, so we were paying for an appraisal that the lender did not want us to see. Since we paid for it, we were not about to leave the room without getting a copy of that report.

Having prepared this filing system with a section for our home ownership documents prior to purchasing our home helped me know exactly what items to request and obtain at our closing.

Since this request was granted with some tension, I am assuming that the appraisal is not usually included with the closing documents. However, I left our closing with a copy of all the documents I requested.

If you don’t have a copy of your appraisal, you can either pay to have an appraisal done or just wait until you need one. Our appraisal (7 years ago) was $250 from our mortgage company’s in-house appraiser. Personally, I would not pay for an appraisal without needing it. Just know that when you get an appraisal, your copy goes in this file opening.

There you have it! These are all the documents housed in my eighth slot of my filing system under home ownership documents. Next week, I will continue with the home ownership documents housed in the ninth file slot. Keep up the great work, and happy organizing!

Question: I’m curious, did you receive a copy of your appraisal at closing?

Home Ownership: Title Insurance

In organizing our important documents, we continue to focus on our home ownership documents. In the accordion-filing system, these documents are housed in the eighth file slot from the front of the box. This slot contains our deed(s), insurance (homeowner’s or renter’s), property tax documents, and survey(s).

The next item following our survey is our title insurance policy. Having researched home ownership before building and purchasing our house, we saw our need for title insurance. Our state does not require title insurance, but we opted to purchase it anyway.

Our reasoning: Title insurance will protect us in the event someone lays claim to our property. If that should occur, we would incur legal fees. Our title insurance would reimburse us for those fees up to the amount of our coverage.

Besides this situation, there are a few other scenarios where title insurance helps to protect the current owners to the said property. Since we invested our money, energy, and time into our home, we opted for this extra protection.

Having paid for title insurance, we received a policy which is kept safe. The policy is housed in this file behind our survey. Hopefully, we will never need this document, but if we do, we know where to find it. 🙂

Next week, I will share the last item housed in this eighth file slot with our home ownership documents. Keep up the good work. You are making progress one item at a time.

Question: Did you choose to purchase title insurance? Why or why not?