When to Use the Reverse Mortage as a Solution

By Spooni Vanrock

More commonplace than ever reverse mortgages are making their way into the senior community. Maybe it's famous spokesmen or basic financial trouble that expedites the process.

The reverse mortgage is an exceptable and real financial problem solver if it is used in the right circumstances.

Is it the best possible tool for everyone. If I said yes here you should stop reading and move on. It's not. I get asked by my clients, "Is this right for me?"

I'm flattered they trust me enough to ask the question. Don't forget I make money if they go forward with a reverse mortgage and zero if they don't. There may be a conflict of interest there somewhere.

Well, their question in no way compromises my integrity, and I, in return, ask them as to the length of time they expect to stay at the house before moving. This is the big question.

Why? Reverse mortgage closing costs are high to the point that if the senior vacates and sells the home in the short term it makes getting the loan a very expensive proposition.

The answer I like to hear is, "I'll be in the home until they carry me out." As a borrower stays in the home longer the cost of the loan continues to decrease as the years go on.

The very minimum acceptable time period, outside of an emergency situation, is three years.

Living in the house for a term shorter than 3 yrs makes the loan quite pricey. I would strongly look at any and all other financial options in this case.

The second point is to look at the relationship between the borrower's income as it pertains to the problem which the borrower is attempting to solve.

Incomes vary greatly. Fixed incomes, by nature, can't change to necessarily meet and beat some large or long-term financial obstacles. On the other hand if the hurdle is short term perhaps it can be worked out by some other means.

Here is your typical reverse mortgage customer... He plans on staying in the home at 3 years or longer. His income is fixed and can't change to meet his financial needs. The reverse mortgage makes sense for this man.

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Determining How Much a Reverse Mortgage Lender Will Lend

By Eversemort Vanrock

As of last month the new law went into effect allowing reverse mortgage companies to loan based upon the new higher FHA reverse mortgage limits.

At $417,000 the new national loan limits, in most parts of the country, absolutely bury the old limits by more than twice the former amount. It's quite a boon, but how does this affect the average borrower?

One could liken the lending limit to the actual value of a home and as a starting point to determine how much money the lender will actually allow the senior to borrow. If the value of the home exceeds the lending limit ($417,000), the borrower receives no additional benefit.

The reverse mortgage lender uses the FHA limits or value of the home as security for the money loaned to the senior. This value, determined by a licensed FHA appraiser, is a critical element.

The other vital derminants of the cash out amount are the age of the youngest borrower and interest rates.

Age makes sense right? Let's face it, reverse mortgage lenders are using actuarial tables, just like insurance companies, to determine how long the borrower will live in the house.

Even with FHA mortgage insurance in place lenders do not want to be in a position where more is owed on the mortgage than the value of the home. That being the case the lender will lend far more to the senior, whom the the actuarial tables say will be out of the home in 2013 as opposed to the borrower who will be out in 2024.

Since interest accrues on a reverse mortgage, to be repaid to lender when the home is eventually sold, the lender must be careful it lends conservatively such that all of the equity isn't stripped away prior to sale. This being the case, a bank lends more when rates are lower.

The prospective reverse mortgage candidate really needs to plug in all three of these variables into the formula to determine how much money he or she will qualify to receive. There are no hard numbers.

Without the formula we can only take a good guess. Today the oldest borrowers will get seventy five to eighty percent of the value of the home. The youngest ones, about fifty percent.

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How to Learn Your Tax Deduction Limits

By John Tarrold

Some taxpayers with simple tax returns may not have to worry about tax deduction limits. However, most taxpayers will have tax deductions that will require them to know what the tax deduction limits are so that they can claim the most deduction on their tax returns. After all, the more tax deductions they can claim, the less taxes they will owe the IRS.

Some people who are new to tax filing and tax planning may not even know what IRS deductions are, let alone what the tax deduction limits are. IRS deductions are tax deductions that the IRS allows taxpayers to take for qualified expenses. These expenses are called tax deductible expenses and they are subtracted from the gross income that the IRS uses to calculate taxes that a taxpayer owe them.

Most of the time, taxpayers want to claim as many IRS deductions as they can and knowing the tax deduction limits will help them. However, not everyone can claim tax deductions and not every expenses are tax deductible. Therefore, it is important to learn the tax codes to know what are tax deductible and what are not so that you can claim the most IRS tax deductions possible.

Some people think that IRS deductions are the same as tax credits and the tax deduction limits are also the same as tax credit limits. They are not. A tax deduction simply lowers taxable income for a taxpayer whereas a tax credit gives the taxpayer money directly. If there is a choice, taxpayers often prefer tax credits than tax deductions because tax credits save them more money than tax deductions do.

Choosing the right type of IRS deductions can affect how much taxes a taxpayer owes the IRS. The tax deduction limits do not matter so much if the taxpayer chooses to claim the standard deduction. However, not everyone can claim the standard deduction. If they can, though, it is the easier option of the two and all you have to do is check the box on your tax return form that says 'standard deduction'.

When a taxpayer is not eligible to claim the standard deduction, he or she will have to claim the itemized deductions and pay particular attention to relevant tax deduction limits. The taxpayer, of course, has the option of not claiming anything at all but most of them do to lower their tax bills. Each tax deductible expense will have a limit of how much a taxpayer can claim in tax deduction.

The bottom line is that by knowing the tax deduction limits, taxpayers can make an informed decision about whether to claim the standard deduction or to itemize his or her tax deductions if he or she is eligible to claim both. There are many books, IRS publications and websites that will give details of what the tax deduction limits are for different tax deductions.

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Credit Reports; Stop The False Accusations

By Jim Bransby

If your credit score means a lot to you, what do you do about it? Most likely you pay your bills on time, never get near your credit limits, and you work hard to pay off of your loans so you are debt free. Yet the credit report comes and you practically faint at their accusations. Your cousin who has the same first and last name has their credit report mixed with yours, someone from a different state is using your name to pay for their internet bill, and those concert tickets you bought when you were eighteen on your family credit card are still unpaid.

More times than not, your credit report is affected by other people's actions whether they were intentional or not. How it happens is a broad spectrum but they can all alter your credit report. So instead of panicking, just relax and look over the report carefully to pick out all of the incorrect information.

How does this happen? There are many different ways. Most of these though are through mix ups with the report. This means that they someone cross referenced your information with someone who has a closely related name; which ultimately results in an awkward score that can be easily disputed. However, if this does happen to you; remember to get your credit report more regularly in case it does not get fixed right away.

The second big thing is the pre-adult credit cards. When you were in high school and your parents gave you a credit card with your name on it for gas and food - those concert tickets were never part of the deal. So instead of paying the bill, they cancel the card and those debts still linger. Now that comes back to haunt you. Do not be too concerned as these can be disputed and often times taken off with patience and time.

The biggest and most worried about possibility is identity theft. Whether or not the person has a close name to yours could determine if it really was identity theft; and if there name is nothing like yours, it is. As soon as you see these charges on your credit report, dispute the claims and report the crime as well. The longer this goes on the worse shape you are in.

A great way to start is to look at your bank account and your credit cards to check and see if anything has ever been taken out without your approval. Say you see something you did not buy or money you did not take out - contact the bank or card company immediately. That way you can put a stop to the withdrawals or spending and hopefully catch the person responsible.

You can also file reports with your state and the Federal Trade Commission regarding the fraudulent claims on your credit. By filing, you prove to the credit reporting agency that you are serious about these claims, and you may also protect others from facing the same problems you have.

So now you know how other people can mangle your perfect credit score. What does it all mean? Overall, you should always be very cautious when talking about your finances and should keep your information and account data secure at all times. One small account number can lead to a world of problems; so be safe to keep your credit score safe.

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Lower Rates For Loans Mortgages

By John Bear

Most people have loans mortgages. Many people have loans for cars or loans just to get by. But now, it is possible that you are now able to reduce the interest you are paying on that loan. It may be that the interest rates for the loan you took out have simply dropped or you may have a better credit rating from when the loan was taken out and now qualify for a lower interest rate.

Looking over at this matter would help you save money especially if your loan is over a long period of time. Be smart enough to have a talk with your mortgage or loan company on how you could lessen your monthly payments and possibly leave you enough money so you can pay off the loan earlier or pay off a lump sum. Ask if refinancing your higher interest loan with one that has a lower rate would be beneficial.

Second, read the loan's terms and conditions and ensure that when you save enough money to pay off the loan earlier, you will not be left with an early settlement fee. You can search for important matters such as this on the phone, Internet or having a one-on-one talk with a financial advisor.

Have the term and conditions compared and always think twice before deciding to take out a new loan or refinance an existing loan.

As always, the credit score plays a significant role when you are to look for that lower interest rate so keep all your payments existing and previous loans up to date. But if somehow, your loan company won't offer you a lower rate, ask them why and what you can do to be considered on getting a good low rate.

You might also want to think about a zero percent interest free credit card if you have an existing loan that has a high interest rate. In this way, you can just have the loan moved to the credit card but be wary that if you do this, always know when the zero percent rate will end, or you might end up paying a much higher interest rate.

The handling fee that is charged by the credit card company should not outweigh the savings that are made by having the loan moved.

Just remember that even if the interest rates on a variable rate mortgage appeals to you, the rates of loan mortgages can just go up or down, so be prepared for that. Fixed rates may provide you security thus giving you confidence to think that you will not be affected by a sudden increase in the interest rates of loans mortgages, but before knowing it, you have already been paying more than you think.

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