A Reverse Mortgage May Not Be Your Best Option

You and the lender may own your home

When you listen to Fred Thompson, Robert Wagner or Henry Winkler telling you the benefits of reverse mortgages, remember that they are actors. They’ve been acting for years --and continue to act in advertisements for reverse mortgages. Reverse mortgages have a limited place in the lives of some seniors, but they should be a last resort choice. Instead, reverse mortgages are on the rise, and so are repayments of reverse mortgages to avoid foreclosure.

You’ve already heard about the advantages of a reverse mortgage -- you can get cash to pay bills, you won’t have to pay the money back, you don’t have to make a mortgage payment, and it’s backed by the federal government. The backing by the federal government doesn’t help you. It provides mortgage insurance to the lender so the lender doesn’t lose money in the event of default and keeps your heirs from having to pay outstanding indebtedness.

Here are some of the disadvantages that you may not know. I’m not an actor and have nothing to gain from this advice -- but remember that a smart consumer is one who has searched for both advantages and disadvantages:

• A reverse mortgage is a LOAN, and the loan company bases the amount you can borrow on your age and the equity in your home. You must be at least 62, and the older you are, the larger loan available to you. Because you won’t live as long at 80 as you would at 62, the lender won’t have to pay for as many years if you wait until late in life to take a reverse mortgage. The older spouse can get the largest amount, so many couples choose to have one person take out the reverse mortgage. This works well until the older spouse dies and the lender looks for repayment. HUD has included a provision in the mortgage to protect the surviving spouse, but some lenders ignore the provision. Make certain that any reverse mortgage is in both names if you’re married. You can read about the problem here: AARP Reverse Mortgages Increasing

• You must live in your home to continue with a reverse mortgage. If you choose to move, or even if you are in a nursing home for more than a year, you aren’t compliant with the reverse mortgage terms and may lose your home to foreclosure.

• You’ve heard that you still own your home. That’s true on paper, but you can’t sell your home without paying the reverse mortgage and all fees associated with the mortgage. Fees accumulate every year and will take most of the equity you have beyond the payment or payments you receive.

• You’ll still have the expenses of owning a home, and you are responsible for the property taxes and maintenance. You can’t let it deteriorate, even if you can’t afford repairs. You own the property and home  when it comes time to pay taxes or make repairs, but the LOAN and LIEN on the house keeps you from selling or moving without repayment of the loan. You can die without repayment, but your heirs won’t own the house without repaying the reverse mortgage and all associated expenses. In most instances, the cost exceeds the value of the home, so don’t expect your children or relatives to benefit. You are basically giving away the house for the money you receive. You get to live there and maintain the property for the mortgage company.

Reverse mortgages are an expensive way to get some cash. The upfront costs are high for the Home Equity Conversion Mortgage unless you get the HECM Saver, and what it saves in upfront costs is added to the percentage rate for the loan. The yearly costs are high as well, and while you’re not making payments, you’re still accumulating costs.

Here’s what AARP says about the things you should know before taking out a reverse mortgage:

AARP Questions Answered About Reverse Mortgages 

What are the alternatives? You’ll probably be better off selling your home and moving to less expensive housing. If you’re a senior, a sale will likely free up the equity you need to relocate. You can downsize and prepare for retirement years instead of holding on to your house that you can no longer afford or maintain. AARP suggests that you might get a roommate if you are alone. Before you make any decisions, ask your children. You might choose to sell the property to a child and use the money you receive to make payments on the child’s loan -- all while you continue to live in the home.  

Who could benefit from a reverse mortgage? If you have no heirs and really need the money to pay for food and medicine, a reverse mortgage may be the answer for you. Consider whether you’ll be in the same position after you spend the money you get from the mortgage. If that’s the case, it won’t help for long, and isn’t the right answer for you.

What else can you do?

• Inquire about public services available for seniors. You may qualify for help from your state or county, or from the federal government. Some drug companies reduce prescription costs for low-income individuals as well. 
• Make some telephone calls. Check with the nearest Social Security office for benefits available. Call the state and county offices, and the Council on Aging in your area.
•  Ask for help before you make any decisions involving the roof over your head.

Here’s some information from the federal Housing and Urban Development website: 

Housing and Urban Development Reverse Mortgage Information 

AARP warns of some of the dangers of reverse mortgages on its website.   

AARP Reverse Mortgage Information 

See you next time!

Linda

Cajun Collection

Review Your Finances -- Count Your Money at the End of the Year

Sterling Silver Flatware May Be An Asset

 

 

End of the Year Calculations Help You Understand Where Your Money Goes

 

 

Losing weight and taking control of your finances are two common New Year's resolutions. You may want to see if you've made any financial progress this year, and you can do this without a financial counselor or planner.

 

If you're interested in handling your money, you may watch Suze Orman, Clark Howard or Gail Vaz-Oxley. In addition to finances, a recurring part of these programs is that the participants seldom realize how much money they spend, and most spend more than they have coming in each month.

 

Four basic calculations tell you all you need to know -- income, expenses, assets and liabilities.

 

Income

 

Calculate your average income for the month from employment and all other sources. Use your gross income so you can see taxes, insurance, 401(k) and any other deductions. If you're not employed, you pay your taxes and insurance from your savings or other income, so it's important to remember that these are expenses whether you see the deduction or not.

 

Expenses

 

Determine your average expenses for a month. If you pay bills online, you may have to refer to the credit card you use or the bank account attached to your bill-paying. Don't miss your automatic withdrawals and quarterly payments.  Divide yearly payments by 12 to get the average monthly payment. Divide a quarterly payment by 3 for the monthly payment. Free services online can help you keep track of your expenses. For example, the Suze Orman Expense Tracker helps you review your expenses without sharing your personal information with the world population. http://www.suzeorman.com/suzetools/expensesheet/

 

Subtracting expenses from income should give you money left over. If your expenses exceed your income, you need to make adjustments in your lifestyle so that you don't spend more than you bring in each month. The calculations are all you need to estimate where you are and where you want to be.

 

Liabilities

 

Calculate how much you owe by itemizing all of your liabilities -- not for the month, but the total you owe. Determine the amount you owe on your house, car, mobile device contracts, credit cards and any other bills. Include student loans in deferral -- you still owe these even if you aren't currently making payments on them.

 

Assets

 

Estimate your assets by checking the value of items you own. If your house is valued at $100,000 and you owe $80,000 on the mortgage, you have about $20,000 in equity (unless you have a second mortgage or reverse mortgage.) You can check kbb.com or edmunds.com to estimate the current value of your automobile. Subtract any amount you owe from the value to calculate your equity. List your savings and bank accounts as assets, along with your retirement accounts. If you have a valuable collection -- coins or sterling flatware, for example -- you may want to list that as an asset as well.

 

Net Worth

 

Once you have base assets and liabilities figures for the year, subtract liabilities from your assets to arrive at your net worth. Use this figure at the end of every year to see if you're making financial progress by increasing your assets and decreasing your debts. 

 

 

Do a few calculations now to put yourself on the right track for the new year. May your year be blessed with prosperity, and may you use what you have wisely.

 

Linda

cajunC

http://www.cajunc.com

 

Texas Homestead Exemption Property Taxes for Senior Citizens over 65

Be a Hawk About Your Money

Texas Property Taxes for Seniors 

Once you arrive at the wise old age of 65, you get a break in Texas on property taxes if you own your residence and are living in it. This is not the same as the homestead exemption that you claim for your residence at any age.

You can also pay your taxes in 4 installments if you choose, once you reach 65. You must pay at least 1/4 of the tax amount before February 1 of the following year, and additional payments by April 1, June 1 and August 1. The penalty is 6 percent plus 1 percent a month if you're late, so if you might forget to make the payment, you're risking extra fees.

Hubby and I turned 65 this year, and we had our birthdates listed with the homestead exemption. When we got our tax notice (arriving about October 15 each year), the discount should have been calculated automatically. We did not see any discount on the form. Of course this prompted me to take the information to the Tax Appraisal District to see what was up. 

Trip number 1: 

The gal indicated that we qualified for a discount and a freeze if we completed an application and proved that the property was our homestead. Proof was to be the remainder of the form for our automobile registration sticker for the current year -- you know, the one everyone throws away as soon as they peel off the sticker. 

Trip number 2: 

I returned to the Tax Appraisal office with auto registration form for my vehicle that I had miraculously saved. (It's good they didn't ask for Hubby's vehicle, too. I didn't locate that one.) The gal made a copy of this and a copy of my driver's license. Now, I was all set to pay the reduced amount. However, she said I would need to pay the entire amount and get a refund in a couple of months.

Waiting for a refund from a government office is one of those things I've probably cautioned you about, so you know I wasn't agreeable to that. The alternative was to turn our "case" in to have the taxes recalculated, and she couldn't guarantee me that it could be done by the end of October. Of course, the end of October is a magic date, since Texans who pay early get a little discount. I decided to take my chances. She took the form, gave me nothing in return and said it would be a week or so. I could come back then. I asked for a copy of the paperwork before leaving the office. You know the importance of having a copy.

Trip number 3:  

Back to the Tax Appraisal office to see if I could pay the newly-calculated property taxes. Well, I couldn't, because they hadn't been calculated yet -- but I could pay the full amount and get a refund.  Ha ha. 

Trip number 4: 

I stopped by the Tax office to pay, since the October window of opportunity is closing fast. She pulled the information up on the computer and it had just been recalculated that day. Of course, the recalculation is done by someone sitting two desks away from the front desk, and when I realized that, I waved to the gal and thanked her for recalculating my taxes before the end of the month. 

Was It Worth It?

Yes, seniors, it's worth it. I drove 12 miles 4 times, so that's 48 miles in gas and about 3 hours of my time. Where else can you make $100 an hour? You must apply the year you're 65 to get the benefit for that first year.

It looks as if the savings is about $300 on $2,000 in property taxes in our area. Plus, it should trigger the freeze on your taxes for the future. You get the advantage of freezing your taxes at the rate you pay when you're 65 so long as you live in the house. Since taxes are high in Texas, this makes living here affordable for senior citizens. If taxes decrease, you get the advantage of the reduction as well. If your spouse dies, you may have to prove your homestead entitlement again under 9.415 of the property tax rules. You can read the Texas property tax rules here: http://window.state.tx.us/taxinfo/proptax/proptaxrules.pdf 

Of course, the recalculated form didn't show that our taxes are frozen for next year, so we'll have to check again next year to make certain we get our taxes frozen. Maybe I'll get to see these nice people at the Tax Appraisal Office again next year.

Take care of little paperwork issues as they come up; call and ask questions. You may surprise yourself at the savings you can get from being a savvy consumer. Taxes, banking and insurance are three areas you can understand and make a difference in your annual expenses.

See you next time!

Linda

cajunC

UUGREGP4WTH4

Understanding Automobile Insurance -- Removing Comprehensive and Collision

Automobile insurance is an unknown for some people who are otherwise savvy with handling money. If you have to rely on your agent to decide what car insurance to buy, you just need a short review to make your own decisions. 

Is it time to remove your comprehensive and collision coverage from your automobile insurance policy? My car is 16 years old, so you might think it's time. I finally got around to having the comp and collision cut, but I was hesitant. Here's what you need to know.

When you get car insurance, you get liability coverage for sure -- that's what every state requires in some form or another. That's to cover the other driver and his car. 

If you want insurance to cover YOUR car and to pay if you have an accident that's your fault, you'll need comprehensive and collision coverage in addition to liability. Collision coverage pays for your car if you hit something; comprehensive insurance pays if a tree falls on your car or if someone steals it. The policy usually says "fire, windstorm, hail, vandalism, theft" etc.

In the scheme of things, comprehensive and collision aren't worth a lot to you because of deductibles and value. Your comprehensive and collision may have a $500 deductible. That means you pay the first $500 before the insurer pays anything. Then, the value of your car is determined by mileage and Kelley Blue Book or Edmunds.com value guides. Undoubtedly, your car is worth more to you than it shows in the book, but insurers work from the blue book value to pay if your car is totaled. They also get the salvage value of your car if you accept the figure offered.

So, if you have $25,000 in liability coverage, that's a significant amount, but if your car was worth $20,000 new and blue book price is $8,000 now, the insurer subtracts your deductible and offers you the blue book value. You might get $7,500 if your car is totaled.

What happens if you remove the comprehensive and collision coverage? First, if you have a loan on the car, you probably can't remove comprehensive and collision until the loan is paid in full. That's because the loan company wants to protect its interest in the vehicle. If you can remove the comprehensive and collision coverage and do so, you probably will also remove the towing and labor and rental reimbursement coverage, if you had those. 

Some insurers will let you keep towing and labor if you have other vehicles on the same policy (Geico, maybe) but you won't be able to keep the rental reimbursement coverage. Rental reimbursement pays for a rental car if your car is damaged and in the shop for repairs. This is helpful but not essential.

If the other guy follows the law and has liability insurance, his policy covers YOU if he's at fault. If he doesn't have insurance or has the minimum limits for your state -- and you have no way of knowing until you have an accident -- you may need uninsured motorist coverage.

If you have uninsured motorist and underinsured motorist coverage with your auto policy, that pays medical bills if someone uninsured or without enough insurance injures YOU. If you can't work, you may also get coverage from the uninsured motorist provisions.  This can really make a difference, particularly if you don't have good health insurance. Your policy may have medical payments coverage or PIP -- personal injury protection -- but those coverages are usually $5,000 or less for medical. You need more.

Uninsured motorist coverage usually can't equal more than your liability coverage, so if you have low limits on your liability insurance, you may not be able to get as much uninsured motorist coverage as you really need.  Increasing your liability coverage may cost less than you imagined. If you remove the comp and collision from your policy, ask your agent about increasing your uninsured motorist coverage with the money you save. If you have to increase your liability, that's ok, too, particularly if you own your home or have assets that could be taken if you have an accident and are sued. Use your insurance money where it works for you.

See you next time!

Linda

cajunC

The cardinals are in Texas all year.

Corning Develops Willow Glass

New Willow Glass from Corning is Bendable, Ultra-Thin and Flexible 

When Corning sold Steuben, I thought the best of Corning was behind us. New developments have proved me wrong. Corning is on the cutting edge of research and technology for you, the consumer.

Corning developed Gorilla glass a few years ago, and it is used for thousands of consumer products, including some Samsung smartphones and Apple iPhones. Corning has a new kind of glass in the works that will affect the consumer products we buy.

The new glass from Corning is called Willow glass, according to "Barron's" June 11, 2012 issue and the Corning website. This new glass is thin and bendable and can be wrapped around products. Corning calls it ultra-slim and flexible. Your smartphone or tablet may be thinner in just a couple of years, thanks to Willow glass.

Willow glass is made with a fusion process with a thinness as slight as100 microns or about like a sheet of copy paper. It can seal electrical components and still provide good optical quality. You can read about it here. 

Corning News Release on Willow Glass 

Watch for new uses for this bendable glass as technology picks up on the possibilities!

See you soon! 

Linda

cajunC