The Good, the Bad, and the Ugly About Reverse Mortgages

reverse mortgage disadvantagesIf your parents are retired or nearing retirement and concerned about their finances, they might float the idea of getting a reverse mortgage past you.

After all, in that commercial, that nice man from Law & Order says that it’s a great way to get supplemental income in retirement.

Unfortunately, there is a great deal that the commercial leaves out.

And these issues are something that the reverse mortgage holder’s family—that is, you—will likely have to deal with.

After all, your parents aren’t getting any younger.

Here is the breakdown of what those in the Sandwich Generation need to know about reverse mortgage disadvantages—before Mom and Dad sign on the dotted line:
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Mortgaging the House, Not the Marriage

should you pay pmi just marriedMoney is a difficult issue for many couples to discuss.

As I talked about in a previous video post, money issues are the #1 cause for strains on a marriage.

It brings out insecurities, fears, anxieties, feelings of competitiveness and many other not-so-great emotions.

But money is a fact of life, and taking control of finances is vital, especially in an uncertain economic climate.

For newlyweds, the issue of financial planning can cause enormous rifts. According to a recent Forbes article, 10 Ways Budgeting Saved My Marriage,

In the article it states,

“Over 50% of marriages end in divorce.  Over 50% of those splits cite financial disputes as the primary reason for the break-up.”

One of the greatest things a young couple can do together is to buy a home. It screams optimism for a shared future. But house payments and mortgages can also be a huge source of stress and cause divisiveness that can be irreparably damaging down the road.
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5 Ways to Get a Mortgage Without Private Mortgage Insurance (PMI)

Avoid PMI

When we were in the process of building our dream home, we pretty well expected to go over budget.

Knowing this we tried to cut expenses as much as we could.  The one expense that we knew that we absolutely had to avoid was PMI (Private Mortgage Insurance).

Recently, I had a reader question also pertaining to PMI:

Joe A. wants to know:

I’ve had my mortgage for 2 years and want to get rid of my PMI. The lender told me that I must get a home appraisal to prove that I have at least 80% equity.

Well, I got the appraisal and then paid the loan down to 80% of my home’s value. But then the lender sent me a letter saying I need a loan-to-value that’s 75%!

Now I’m worried that I’ll pay the loan down to 75%, but they’ll just have another excuse not to remove my PMI. What should I do?

Before I tell you the best ways to get rid of PMI, let’s take a step back and make sure you know what it is.
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Why the VA Home Loan Program is the Best Option for Veterans

When I was deployed in Iraq in 2005, I had the unique opportunity to become a first time homeowner. My wife had a family friend who was ready to sell his home at a good price and asked if we were interested. It was the perfect starter home at a price that we couldn’t resist. The only obstacle – I was in Baghdad.

Luckily, a local mortgage broker was able to assist us that was versed on VA loans which I obviously qualified for. After mailing forms to be signed literally across the world, we were homeowners.

The following guest post is from the VA Mortgage Center which outlines the basics of the VA loans.

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Mortgage Rate Fluctuations After the 2011 Debt Ceiling Increase

Mortgage Rate Fluctuations

Underlying all of the controversy surrounding the United States federal budget deficit and the debt ceiling is the simple concern as to how it will affect everyday life for Americans. Although the sun will still rise in the east and trees will still grow new leaves in spring, the financial markets that determine, among other things, what your gasoline costs and what mortgage interest rates will be, are going to change.
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Do You Really Need a Mortgage Broker to Get the Best Deal?

How a mortgage broker can add more value and get you a better home loan deal

The home buying process can be an incredibly complicated process because there are so many different things to consider. You have to negotiate the price, arrange financing, and close on the deal in a relatively short period of time. A real estate agent alone is often not enough to resolve all of the issues. There are other real estate professionals which can do a great job. Let’s take a look at one of the most valuable professionals.
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Home Equity Loan Vs. Home Equity Line of Credit

It’s time.  The bathroom with wallpaper that pays tribute to Ausitn Powers has overstayed it’s welcome.  Your long overdue to make some much needed improvements and upgrades.  But where does the money come from?   You could charge it on the credit card, but the 14.99% interest rate isn’t all that attractive.  Realizing you have some equity in your home, you explore your options.

If you are looking to borrow funds from your home’s value, you have two options. You can either choose a home equity loan or a home equity line of credit. Here is a comparison of the two.
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Should You Do a HELOC or a Second Mortgage?

Many of us have a lot of our net worth tied up in our homes. Indeed, the equity that is built up in a home can be a source of funding when needed. If you have equity in your home, you might be considering tapping it to make home improvements, consolidate debt or pay for your child’s wedding. Most people, when deciding to access the equity in their homes, choose either a HELOC or a second mortgage. Depending on what you are planning, one might work better than another for your situation. [Read more…]

Pros and Cons of a HELOC. Savvy Financial Management or Just Another Debt Trap?

Celebrate! You are now officially a homeowner. <insert dance and jig here if you like> For many, owning there first home is a dream come true. Becoming a homeowner comes with its own set of responsibilities, as well as benefits.

One of these alleged benefits is the ability for qualified homeowners to borrow against the equity in their home. This can be accomplished through a home-equity loan or a home-equity line of credit. While both options are popular among homeowners, here we look specifically at the home-equity line of credit as well as the benefits and drawbacks associated with it.
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How Much Of a House Payment Can You REALLY Afford?

At a recent entrepreneurial conference that I was invited to sit in on a guest panel, our panel was asked a really good question by a young female college student regarding mortgage payments. The nature of the question was this:

My parents had always advised me about how much of a house payment I could afford based on a percentage of my salary. But I know the rules have changed since my parents time and even more so since the financial crisis since 2008. What is the approximate percentage that is advisable for one’s mortgage payment vs. their gross income?
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Dangers of Using a HELOC as Short Term Savings Solution

One of the trends that became popular during the housing market boom was relying on home equity to pay for unexpected expenses. The idea is that you can use a home equity line of credit (HELOC) to cover for emergencies. However, even in the good economic times this was probably a dubious strategy for short term savings. Now, with credit tighter than it has been years, using a HELOC for short term savings can be even more of a danger.

Here are some of the reasons to think twice before you use your HELOC as a source for short term savings:
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Before Purchasing a Bigger Home Consider These Steps or Go Broke

There are many reasons people consider buying a bigger home (our building our dream home as we did). Often, newlyweds might purchase a “starter home” which is intentionally smaller than their ideal home, in order to save money. They figure they can buy a larger house later, when they start adding children to their family or start earning more money. Maybe you’ve decided to run a daycare or other business from your home and require more space to do it well. Whatever your reasons for wanting a larger home, here are some things to consider before purchasing a big home that will prevent you from going broke.
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