A reverse mortgage is a loan only available to seniors aged 62 and over. What this type of mortgage does is release the home equity from the property into a lump some or into multiple payments . The home owner then lives their life in bliss without worries of repayment because the obligation to pay only factors in when the home owner dies, the property is sold or the the home owner leaves to go to a senior citizens home.

Requirements

The borrower must be at least 62 years old. There are no minimum income or credit requirements for this type of loan as like with other types. There must be no existing loan ore mortgage against the property at the time but if there is you can simply apply the new reverse mortgage money to payoff the existing mortgage loan amount. Lower valued property types such as mobile homes do not qualify and if there is a pending bankruptcy, the process may take a longer time. One final necessity is that the home owner must attend free financial counseling by the Department of Housing and Urban Development (HUD).

Reverse Mortgage Money Factors

There are five primary factors that must factored in to determine the amount that will be paid to the home owner.

1. The appraised value minus any repairs that must be paid and whether there are any existing liens on the real estate property.
2. The interest rate that is listed by the U.S. Treasury 10 year T-Bill or the LIBOR index.
3. The age of the home owner also determines the amount of return.
4. Line of credit does play a role because it will maximize the amount collected.
5. Location is another factor and whether the maximum loan amount is subject to the maximum loan limits.

Once the home owner cashes out then the funds can be sent to a type of escrow account. However if you do not take the option of a escrow account, then you must pay all taxes and/or insurance. If there is lapse of some sort, then you can be subject to default on the reverse mortgage.

Costs and Interest Rates

Cost vary but are typically like an insurance premium of 2% of the loan and a 2% origination fee in addition to the normal closing costs. These are usually several thousand dollars and other costs such as third-party costs like appraisal fees, title searches and so on do apply. So typically out of a $100,000 loan there would be $4,000 in costs besides the normal closing costs amount.

You can include all of these fees within the loan itself so that no costs are made immediately out of pocket in cash. This means that the initial loan principal will be more and the fees will accrue interest.

The interest rates on a reverse mortgage are similar to those of Adjustable Mortgage Rates (ARMs). They can be set on a annual, semi-annually or monthly basis.There are fixed interest rates now but they still are rare. While no payments are made during the home owners lifetime, the interest accrued is added to the principal of the loan.

Tax Related Info

According to the American Bar Association

• The Internal Revenue Service (IRS) does not consider the payments from a reverse mortgage as income.
• Annuity advances may be taxed partially.
• You cannot deduct interest until the end of the loan.

End of the Reverse Mortgage

So this means that the home owner has died, sold the property or moved out of the property for 12 months. The loan will be paid off from the sale of the house or after the heirs refinance. After the loan is paid of, the heirs may receive any excess funds or if there is no hier then the bank will take the difference.

This type of mortgage does have some major benefits but be warned, never miss the tax or insurance payments.

Popularity: 100% [?]

Being frugal should always be top on your list in order to be retire early.

Steps for early retirement

• Be very Frugal. Live below your means and don’t pay for anything that you don’t have to.
  • Use coupons for everything.
  • Ride a bike to your destination or car pool.
  • Send your child/children to public school instead of private school. Major money saver here.
  • Use credit cards with cash back rewards like Citibank, Chase and CapitalOne.
• Save at least 20% of every paycheck. After five paychecks you already have saved a whole paycheck without thinking about it. If 20% sounds like too much, then by all means start by 10% or even 5%.
• Learn how to get multiple streams of income. Get another job, start blogging, fix computers or cars in your spare time. Start somewhere and then that whole paycheck can become 100% saved.
• Invest for the long term in the stock market and always buy low. Try hassle free methods like investing in Mutual Funds and Exchange Traded Funds (ETF). These help you because you don’t need to buy individual stocks and they are well diversified.

Popularity: 31% [?]

I was very fortunate to always get what I wanted when I was growing up. All I had to do was say I wanted something and sure enough I would get it. That made me into an impulsive buyer when I became an adult. I never looked for sales and therefore money just trickled out of my savings account.

I am not going to talk about looking for coupons or impulsive buying. When you work so hard to save money into a savings account you want to keep it there.

Save Money and Keep your Saved Dollars

1. Create a personal budget – very important first step. The best way to save money is to trim what doesn’t need to be spent.
   • Depending on your income and expenses you will know a reasonable number to set aside solely for savings. Declaring a realistic figure like $25-$50 per week or maybe even bi-weekly.The point is something is always better then nothing so don’t get discouraged if it seems like a small amount.
2. The 3 Bank Account Difference – the 3 accounts all serve a distinctive purpose.
   • Spending Account – this account can be a checking or savings account. This account will receive paychecks and will take the role of dealing with daily expenses. This one is okay to have an ATM card in order to withdraw money for day to day activities.
   • Rainy-day/Emergency Fund Account – this will be your emergency blanket. This will cover any unforeseen emergencies. Job loss, car repairs, household repairs, house tax increases and so on.This account should have no ATM card and should be emergency use only.
   • Savings Account – this account also should not have and ATM card and you will not transfer out money from this account for day to day purposes or things like groceries and so on.I use currently use Paypal’s money market account for this and I also use Sharebuilder money market account.
3. Fill up Emergency Funds Account – this account should be filled up before the savings account.As a rule of thumb try to save enough to cover all of your expenses for at least the next 6 months or do like me and save enough for 10 months
4. Save Money Now – when you have a nice emergency fund setup and ready only then would you start saving.Try to set an automatic transfer that occurs every two weeks or every month. Automatic transfers makes sure that you do it and you never have to worry about remembering.I picked up this from David Bach and his Automatic Millionaire book.

No worries about tracking where your money goes and wondering if you put money in.

That’s it to automatic savings and novice budgeting.

Popularity: 39% [?]

Bank of America will be buying Countrywide Financial for $4 billion in stock. This will be both saving the country’s biggest mortgage lender and will also save the feds from having to devalue the American dollar any more then it already has.

This will help calm fears of a recession and inflation. Saving the over all economy and becoming the nation’s biggest mortgage lender and loan servicer.

If your like me and have shares in Countrywide, you will receive 0.1822 of a share in Bank of America stock in exchange for every share in Countrywide.

It is believed that this will increase earnings per share for Bank of America in 2009.

Countrywide shareholders gained 51.4 percent on Thursday due to possible reports that were then confirmed today.

Lets see what will happen now that I have to start paying Bank of America for my Mortgage.

Popularity: 42% [?]

The buzz is that there is a contender to Quicken and it is web based and free. You can check your finances anywhere and at anytime you wish. It has a nice look and feel with speed from the Ajax backend that it was built on. I am no super finance guru but I will give the review that I feel best with for average to intermediate users.

Advantages

• Fast.
• Free.
• A rival to Quicken even in its beta stage.
• Easy setup.
• Accessible anywhere.
• Beautiful Ajax design.
• Tons of graphs and charts.
• Easy way to see trends.
• Nice feature named “Ways to Save.”

Truly one of the best rivals to Quicken and it is free to use with no installs to worry about. It is built on a web technology that allows it to load various parts of the web page in an auto update way. I just added my user name and password for my various accounts and waited a short minute or less for account history to be updated; then I was ready to rock. They added a plethora of charts and graphs to show spending habits in a glance. You can even check spending habits as easy as just viewing your personalized trend reports page. Mint.com truly tries to make personal finance as easy as checking your email. A good feature that I really like is the “Ways to Save” money section. I love it because what it proposes to do is automatically check different banks and get you the best rates that it can find all automatically. I feature still has some bugs but it shows a lot of promise.

Disadvantages

• Didn’t know my credit card info like interest rate and total rewards.
• Misclassified a Countrywide Mortgage Payment as an Electronic Boutique Purchase.
• Still in Beta.
• Suggestions to save money section named “Ways to Save” needs work.

With all good things there are the disadvantages or the minor short comings. I plugged in my information for one of my credit cards and up to now it doesn’t know the exact interest rate or APR. Mint.com also tries to categorize all info automatically but still false short in this aspect as well. One of my mortgage payments was classified as a Electronic Boutique purchase but was then replaced by transfer. The suggestions to save money is still a major point but however still needs some work as well. I don’t want to be too mean because the web application is still in beta.

Conclusions

All I can say is try it out and see what you can get from it. It’s free and over round pretty good. Just remember that it is in beta still so don’t go by everything that it has to say without first thinking it thoroughly through. That goes especially for the ways to save money section.

Popularity: 78% [?]