My Insurance Insider and Finance Blog

Image via Wikipedia Reverse mortgages or lifetime mortgage in UK are the loans against your home that are increasingly useful source of revenue for the aging population.

During your financial crunch you may end up with no money available to meet up your emergency needs. At some point of time you may even think of selling your house and releasing funds. That means leaving your loved home you are forced to take a less desirable property in an inferior neighborhood.

With a reverse mortgage, you can convert the value of your home into cash without any repayment. This is a new kind of concept for loan. The cash you get from a reverse mortgage can be paid to you in several ways. No matter how you got this loan, you normally don’t have to pay anything back until you die, sell your home, or move out of your home.

Who are eligible?

To be eligible for reverse mortgage, you must be at least 62 years of age, own your home and must be living in that home, etc alongside with other conditions as stipulated.

And what types of homes are eligible?

The home you’re going to reverse must be a single family dwelling or a two-to-four unit property that you own and occupy. Townhouses, detached homes, units in condominiums (must be FHA approved) and some manufactured homes are also eligible.

Reverse mortgage differs from other types of home loans. Prior to approval of the home loan, lenders always verify your income (as a borrower) to see how much you can afford to pay back each month. But with a reverse mortgage, you don’t need a minimum amount of income to qualify for.

HUD’s Reverse Mortgage is a federally-insured private loan, that can give senior citizens greater financial security. Many seniors use it to supplement social security, meet unexpected medical expenses, make home improvements, etc.

When you purchased your home, you probably borrowed the money you needed to buy it. Then you paid back your mortgage loan every month till possessing the full ownership. As you made each repayment, the amount you owed became smaller, but your ownership value or equity grew larger. Eventually you then owed nothing, and your home equity equaled the value of your home.

How much money can I get from my home?

It depends on your age, current interest rate, and the appraised value of your home or FHA’s mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow.

Despite some drawbacks reverse mortgages are a very useful source of money for many age-old people that own their own homes. It is certainly worth exploring and a way of enjoying the fruits of a lifetime of work while you are still able bodied. What is the use of tying up all your money in property until the day you die when you could be enjoying the use of some of that equity now.

photo credit: richardmasoner

Car makers are always exploring new ways to catch your eye by rewarding cash backs, 0% financing or even offering $2.99/gal. gas. Quite interesting-isn’t it?

Chrysler and American Suzuki are offering such deals on gas, hoping to boost the car sales. Chrysler is offering car buyers gas at $2.99 per gallon. American Suzuki, on the other hand has come up with a more modest deal by giving qualified buyers a prepaid credit card that can only be used to buy gas.

Under Chrysler’s deal if you buy a car, you’ll get a pre-paid credit card that can be used at most gas stations costing you $2.99 per gallon. Means a $1.01 savings over the present national average cost of about $4. Then who’s going to pay the rest? Its Chrysler. And the difference (between $2.99 and the pump price) is being credited back onto your card. You’ll get this subsidized gas until July 31, 2011, if you buy a car(a specific model) within July 7, 2008.

Chrysler’s offers 36,000 miles to cover over the life of the promotion. Now, under this promotional offer, your exact quantity of subsidized gas depends on the purchased model. The biggest allowance is 2,400 gallons for 5 models over three years that estimated to be 15 miles per gallon for those models.

If you somehow drive 36,000 miles and use 2,400 gallons of gas, you’ll have to pay $7,176 out-of-pocket which would save you $804 over 3 years. If you buy a car that drives 21 mpg, the total gas required to cover 36,000 miles is 1,714 gallons. And at $4 per gallon, it would cost you $6,855. And that’s $321 less expensive than the 15 mpg cars.

With a Dodge Ram 1500 pickup, the buyer gets $3,000 cash back on the highest allotment of gas. The SRP (suggested retail price) for the Dodge Ram 1500 is $22,385. If you use the rebate as a down payment and get a three-year loan @ 6%, your net purchase price would be $21,230. Now adding in $7,176 (out-of-pocket as above) brings the three-year cost of subsidized gas to $28,406

Now if you purchase the 21-mpg-car at the same price, with the same loan, no rebate and with gas at $4, the three-year cost of the car would be $31,370 But if the company offers the same rebate for the better mileage car also, your financial package improves. And your three-year cost would drop to $28,085, still paying $ 321 that is less than the Ram. So rebates can make a difference.

But there are some limits on Chrysler’s deal. If you buy more gas than the yearly allowance, you pay full price for the gas until the next year of the program starts. For Chrysler models with better mileage, the rebate and the gas allotment drop.

On the other hand, Suzuki’s gas deal is simpler. If you qualify for 0% financing you’ll get a prepaid card to pay for gas.
Toyota hybrid, starts at $21,500 with a mileage of 45 mpg. If you drive 12,000 miles you’ve to pay about $1,066. With no rebate, and 6% loan, the three-year price tag is $26,744 - cheaper than the Dodge Ram with both rebate and the gas subsidy.

photo credit: tsuacctnt

Dreaming of owning a home of your own? May be you’re. But acquiring a dream home is becoming very illusive these days. Everyone would like to have a home that is paid for free or mortgages that had paid over 25 or 30 years.

It’s true everybody is guided to some extent by their budget. There is a way to pay off the existing mortgage on your home quicker and save money in the process.

Most of the mortgages have a built-into Accelerated Payment Clause. This allows the borrower to pay more than the minimum amount of the monthly mortgage payment. The benefit of paying extra dollar against the mortgage will actually lower the outstanding balance of the mortgage loan. This increases the equity in your home faster over time. Thus lowering your outstanding balance, you will save on interest charges.

Let’s suppose you are an average person earning $50,000 a year, and you are saving at a rate of about 4% annually. This means that you are putting $2000.00 in the bank every year that translate into around $167.00 a month on your passbook savings with less than 1% Annual Percentage Rate (APR).

So, if it is the case, why not take $100.00 of this money that you would normally save and pay up the mortgage on your home ahead of time? How about paying off the full $167 ?

If you take out a mortgage on a house for $200,000 at a 6% fixed rate, and the term of repayment in monthly installments is over 30 years, your monthly mortgage payment would be around $1200

If you pay an extra $100 dollars per month for the amortization of your mortgage, you would be able to add $1,200 to the equity in your home every year. Just imagine how much could you have accumulated over the same period of time, if you have put all of your money i.e. $167.00 per month to your home equity?

In this instance, you had to pay $432,000 to buy your home over the span of the 30 years mortgage term. And when you add $100 to your mortgage payment every month you would save $46,300 in interest charges over the mortgage period that helps you to clear off your mortgage earlier.

Thus you would be able to trim 38 monthly payments off your repayment of the mortgage. So the mortgage would be paid off approx 3 years before your scheduled time.

The strategy here is to transfer your money from your passbook savings ($2,000.00 per year), to paying $1,200.00 on your mortgage, and still saving $800.00 each year.

This method can be used in any situation where the mortgage has an Accelerated Payment Clause built into it. It will work best if you are consistent with the amount that you pay on your mortgage every month. Any change in the amount of monthly repayment of the mortgage will affect the amount that you will actually save.

It is recommended to check with your banker to find out if your mortgage allows for Accelerated Payments. Then you can use this strategy to save a lot of money on your mortgage and own your home soon.