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Due Diligence and Safety Nets
Due Diligence and Safety Nets By William Cate If you're an Angel Investor, you're an endangered species. You live in a high-risk environment. Many of your predecessors failed to take even the minimum safety precautions to ensure their survival....
How to Dispute Credit Report Errors
Your credit report--a type of consumer report--contains information about where you work and live and how you pay your bills. It also may show whether you've been sued or arrested or have filed for bankruptcy. Companies called consumer reporting...
The Biggest Crime In Small Business
The biggest crime in small businesses today goes unnoticed by most outsiders. It is not reported in the media. There are no police reports filed and companies do not even mention it on their websites. People don't talk about it on the street and...
The New Economy - Making a Living in the New World
The New Economy Copyright 2001 by Perry Jones Revised 2005 A million jobs and more are being lost each year overseas. Thousands of people each month are giving up hope of ever finding a job. This is a huge tragedy the effects of which have not yet...
The Road to Success
Never have I been in the position of making as many critical decisions as I am now - at the helm of my own business. I never imagined that providing freelance secretarial services could be such a busy endeavor! When I first started it was so...
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Reverse Mortgages Explained
A 'Reverse Mortgage', also known as 'Equity Release', is a popular way to use your main asset (your home) to free up some cash for other purposes. In a standard loan, your income stream is used to 'qualify' for the loan. The bank will want to see that you have enough cash-flow from your job or other source of income in order to make the payments on the loan. By securing this forward loan on your house, the bank has extra security. After all, if you stop paying, they can take away your house. As the years go buy, you will build up 'equity', which is the difference between what your house is worth, and how much you owe on the loan, which will be reducing as you pay off principal.
A reverse loan, in contrast, requires no proof of income, no credit checks etc, you simply have to own the home you are borrowing against. The reason for this is that interest payments are 'rolled up' on the reverse loan - i.e they are added to the loan, and not repaid. Over time, of course, this starts to eat up your equity, because as each interest payment is added to the loan, interest starts being charged on the previous interest too!
Popular with older
citizens, the reverse mortgage is often structured in such a way that the loan only becomes repayable on the death of the home-owner. Depending on the size of the loan and current market conditions, there may actually be no equity left when the loan is finally repaid, a matter only of interest to home-owners who prefer to leave something for their children. As with all loans, be careful not to default on ancillary charges, such as property tax, insurance, rates etc, as these could all lead to the loan being reclaimed early (foreclosed). Typically, the bank will have an option built in to the contract to increase your debt by paying these charges on your behalf, should you default, and this is not an option you want exercised, as you will then start paying interest on those charges too!
To sum up - reverse mortgages can be useful, but treat carefully - they can have a sting in the tail. Keep an eye on the outstanding balance every month, versus the value of your home for peace of mind.
About the Author
Robert Hutchinson writes for www.mortgagedown.com the site for free mortgage advice fast!
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