What to Do When Your Reverse Mortgage Becomes a Financial Burden

Finance

Did you take out a reverse mortgage? Many seniors consider reverse mortgages to deal with financial issues that they encounter during retirement.

There can be a lot of great reasons to take out a reverse mortgage. However, they are not without their own issues. You need to be aware of the potential pitfalls that you are going to encounter when you have a reverse mortgage.

Some of the problems with reverse mortgages might creep up on you over time. Fortunately, there are ways that you can deal with them.

Here are some things that you can do to offset any issues that were created by a reverse mortgage.

Consider refinancing your reverse mortgage

According to All Reverse Mortgage, “You can also refinance your reverse mortgage if you don’t like the interest or other terms associated with it. This might be your best option if you think that you will need to sell your property in a few years.” Refinancing will keep you from losing a large amount of money and interest. It would also be ideal if you want to make sure that your kids or other people inheriting your estate will get more.

The process of refinancing your reverse mortgage is very similar to that of refinancing a traditional mortgage. The only caveat is that you generally need to wait at least 18 months after taking out the original reverse mortgage before you can refinance it.

You should take a close look at your credit history before submitting a refinancing application. Your payment history keeping up property charges is going to be the most important factor for qualifying for a better HECM in most cases.

If your credit has improved since you took out the last reverse mortgage, you will possibly be able to qualify for that terms. You can also try to take steps to improve your credit score if you want to take preemptive measures to get a better deal. You should start by looking at your credit reports and seeing if there are any errors on them. Around 20% of all credit reports contain errors, which could be hurting your score. You should also take a close look at any outstanding debt that you have. If you still have a large amount of money from your reverse mortgage, then you should use it to pay off high interest debts, such as credit card bills. This will both boost your credit score and minimize your long-term expenses. It will be a win-win, especially if you get a cheaper read on your reverse mortgage.

You should also settle any possible liens on your property. They could be hurting your potential of getting a better read on your reverse mortgage.

Lease your home instead of selling it before you move

When you take out a reverse mortgage, the bank is going to give you money that will later be taken out of the value of your home. Unfortunately, you have to hold onto the property if you don’t want to pay the reverse mortgage loan back.

You might end up in a situation where you really can’t stay in your home. You might feel like you are a prisoner to your loan, because it is keeping you from relocating if you can’t afford to pay it back.

You might not have been concerned about this when you first took out your reverse mortgage. You probably thought that you would never relocate. Unfortunately, problems happen. You might get an unexpected divorce. You might develop health problems that prevent you from living in an area with bad weather or excessive pollution. Your kids might take new jobs in another state, which forces you to move as well if you want to be close to them.

Before you bite the bullet and sell your home to repay your reverse mortgage, you should explore other options. One idea that you might want to consider is leasing out your home and using the cash from it to pay for new housing wherever you want to relocate.

This might give you the best of both worlds. You get to keep the money that you secured from your reverse mortgage and have the flexibility to relocate at the same time. You don’t even have to physically deal with your tenants if you are willing to outsource that obligation to a property management company.

Explore property tax relief services

Property taxes are among the reasons that people when face problems with their reverse mortgages. You might be required to repay your reverse mortgage if you stop paying your property taxes.

You might be able to get ahead of the problem by seeking property tax relief services. The terms of these services vary between jurisdictions, so you should pay close attention to the requirements. The governor of Idaho recently signed a property tax relief bill, which is an example of how these services work. If you are eligible, you might avoid property tax problems that could trigger a requirement to repay your reverse mortgage.

Make sure that you are reverse mortgage is a benefit rather than a liability

There are a variety of reasons that reverse mortgages have become popular in recent years. They really do offer a lot of benefits. However, there are some situations where they could become a burden, so you need to take steps to avoid that from being the case.

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Tips for Achieving a Debt-Free Life

Finance Money

Some 189 million Americans have credit cards with the average balance per household being $8,398. Keep in mind, that’s just credit card debt. We haven’t mentioned mortgages, car loans or student loans.

Sadly, debt is so prevalent in America, most people consider it a way of life.

However, it is possible to live without it.

Here are some tips for achieving a debt-free life.

Create an Emergency Fund

If you have yet to do so, make it a priority to put away at least three to six months of your monthly expenses as a hedge against income disruption or large unexpected expenses. Having this money put away will enable you to weather such instances without incurring more debt — or at least as much as you would have otherwise.

Prioritize Paying Off Debt

As common sense as this particular tip may seem, most people have no idea how to do it.

Let’s say you’re one of those people who have four credit cards, with the total balances adding up to $8,398. Let’s say the balance on one of the cards is $3,000, another one is $2,500, another one is $1,500 and the last one is $1,398. Now, let’s say the minimum payment on each of those cards is $50, and you’ve been paying $100 per month on each one.

That’s a mistake; it’ll take too long to pay them all off that way.

The Debt Snowball

Instead, make the minimum payment on all of them except the one with the $1,398 balance. This will afford you $250 monthly to pay toward that one, which will help you pay it off more than twice as fast as when you were only paying $100 monthly.

Once you’ve eliminated that balance, you’ll have $300 monthly to put toward the $1500 balance, which will also have been being paid down at the rate of $50 monthly while you were killing the first account. Repeating the process with each successive card will give you the entire $400 to put toward the highest balance when all of the others are cleared up.

You’ll pay off all four cards much sooner than you would at the rate of $100 monthly on each one.

By the way, this works with car loans and mortgages too.

You can eliminate all of your debts with this method.

Debt Consolidation

Another way to approach debt elimination is with a credit card consolidation loan. While it might seem a bit backwards to make debt to get rid of debt, there are situations in which credit card consolidation can make sense.

You have to make sure the consolidation loan you take will let you pay your debts off sooner than you would by paying them individually. You’ll also want to seek a lower overall interest rate and a lower overall monthly payment.

Focus on Saving and Investing Next

With your debt eliminated, you can turn your attention to preparing for the time when you’ll no longer go to work every day. In other words, it’s time to start building your retirement fund.

We recommend eliminating debt first because the interest you’ll pay vs. the interest you’ll earn tends to be higher. Eliminating debt effectively means your money earns more interest afterwards — thus it’s a good investment.

Create a Spending Plan and Stick to It

One of the most fundamental of the tips for achieving a debt-free life. Creating a spending plan helps you ensure your money is working for you in every way possible, as opposed to against you.

Your goal should be to live on 80 percent of your income or less, while saving/investing at least 20 percent or more for your long-term goals. This becomes easy to accomplish with your debt laid to rest. Plus you’ll be able to save more so you can make subsequent purchases in cash, rather than charging them.

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One in Four Britons to Experience Debt After Holiday Season

Money

Many of us feel the pinch when it comes to Christmas. As wonderful as the festive season is, it puts a tremendous amount of pressure on us to spend a considerable amount of money on creating the ‘perfect Christmas’, whether this be on buying presents for loved ones, food and alcohol for the Christmas festivities, or the amount spending travelling to see family and friends near and far, the costs soon start to add up. Millions of people in the UK are accumulating debt to be able to have Christmas, according to statistics.

A recent poll carried out by comparison site uSwitch which surveyed over 4,000 consumers showed that a staggering one in four of Britons will be starting the next year with a credit debt average just under £500 (£452). The same poll revealed that across the UK, British shoppers end up loading almost £8.5 billion of debt onto credit cards in order to pay for Christmas. Many are also using high cost loans in order to cover the costs of festive season too. (Source: Payday Bad Credit)

With Britons bombarded with adverts on social media, TV and radio, it is no surprise that many feel the pressure to spend more money during the month of December, but the consequences can be dangerous. It can lead people ending up getting into a cycle of debt, or spending the rest of the following year paying all their debts off.

Some suggestions have been made about Black Friday which offers the opportunity to save money on household brands, although also encouraging unnecessary spending.

In the study by uSwitch, over half surveyed believed that it was likely they would still be making repayments on Christmas spending for this year in the following December. Almost half (48%) stated that they were worried about the level of debt they could end up accumulating over Christmas and paying into the New Year.

The Disposable Income Index (DII) for 2017 by Scottish Friendly, an ISA provider revealed some stark findings about Christmas debt too. Over three-quarters of households that had children stated that they had made financial sacrifices in order to buy Christmas presents.

This was most commonly in the form of using their credit card to pay for purchases, or through taking out a high cost loan or unsecured loan. Similarly, millennials were found to really feel the pinch too. Three quarters of those surveyed also said they were making financial sacrifices to buy things for loved ones at Christmas time. It was estimated that around 14% of these millennials intended to take out a payday loan so they could achieve this.

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Banking Backtrack – 6 Tips For Reconfiguring Your Financial Priorities

Money

What are your Financial Priorities?

In order to achieve your goals, you need to make them concrete. Evaluating your financial priorities is the first step in successfully restructuring your expenses to meet your long term goals. Making a list of priorities in order of importance is necessary in order to restructure your financial priorities and ensure that you are taking steps forward, rather than simply making ends meet. Achieving your financial goals may require assistance from a personal loan to put you ahead, or may involve assistance from a trusted financial advisor. The following six tips are essential in order to successfully re-evaluate your financial priorities.

1. Remain on top of bills

Are you earning more than you are spending? The most important step in separating our most fundamental financial needs from the rest is ensuring that your income exceeds your expenses. Debt consolidation using a personal loan allows you to combine your existing debt and make one monthly payment through a lower interest rate as offered by a personal loan. This makes your debt easier to pay off, providing you with an allocated time frame to repay the consolidated loan rather than having multiple and confusing monthly payments of various debts. Consolidating your debt through a personal loan saves you a lot of money in interest and helps you remain on top of your bills.

2. Decide what is important

Your financial priorities will change over the years, particularly if you start or expand a family. Reviewing your spending habits over the last few months will give you a general idea of what your spending habits indicate is important to you. For most of us this will be food, education needs and other necessities and preferences. However, it is important to view whether your spending habits align with what you hope to accomplish in the future. What would you most like to do with your money? This leads us to point three.

3. Look at the big picture

While immediate needs and obligations are important, it’s important to consider your finances in accordance with your ‘big picture’. Too many people configure their financial priorities simply to make ends meet. Whilst this may be all that your income can afford, the only way to truly get ahead may be to apply for a personal loan. Using a personal loan to start-up your dream business, take the holiday your family needs or get the surgery you have been waiting for, ensures that you are taking steps forward rather than remaining financially stagnant. Creating measurable goals that can be accomplished, keeps you motivated and ensures your money is being used to further your ambitions.

4. Maintain an emergency fund

For many of us, an emergency fund is something we will “start later in life when I have more money”. However, when reconfiguring your financial priorities, ensuring you have money aside for an emergency situation is vital. When the financially unprepared are hit with an unexpected and expensive emergency, they are left scrambling for whatever funding is available. Often this will result in costly terms and interests rates. Comparing the rates of various personal loans in advance can ensure that if you require a loan for an emergency situation, that you receive the best terms available.

5. Optimize your returns

Are there any other strategies you could employ in order to maximise your goals? This may include seeking advice from a financial advisor in regards to investing your money in stock or a property. Investing your money can further your wealth and help you gain financial independence. Considering ways to optimize your returns is therefore an important step in the assessment of financial priorities.

6. Review regularly

Once your priorities have been ordered it becomes vital to remain on track and regularly consult your list of priorities. It can also help you track when your strategies have been successful and when may be the best time for you to make your move, secure a personal loan and achieve what you outlined in your ‘big picture’.

Being aware of your financial priorities ensures that you remain focused on the most important aspects of your financial life. Evaluating your goals and your spending habits ensures that your money is spent in a way that reflects your priorities, and furthers your ambitions. Reviewing your situation periodically will ensure that your financial priorities are current, so that your money is used in a way that most satisfies you.

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