MONEY MATTERS & INVE$TING
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If it sounds to good to be true, it usually is! |
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P.T. Barnum (Barnum & Bailey Circus) once said that "a sucker is
born every minute", don't be one! |
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When you purchase a
municipal bond, you lend money to the "issuer," the government
entity (states, cities, counties and other governmental entities) that issued
the bond. In exchange, the government entity promises to pay you a specified
amount of interest, usually semiannually, and return your money, also known
as "principal," on a specified maturity date. The money they raise
from these bonds is used for build highways, hospitals and sewer systems, as
well as many other projects for the public good. Not all municipal bonds offer income exempt from both
federal and state taxes. There is an entirely separate market of municipal
issues that are taxable at the federal level, but still offer a state—and
often local—tax exemption on interest paid to residents of the state of
issuance. Most of this booklet refers to munis which are free of federal
taxes. Because of the special
tax-exempt status of most municipal bonds, investors usually accept lower
interest payments than on other types of borrowing (assuming comparable
risk). This makes the issuance of bonds an attractive source of financing to
many municipal entities, as the borrowing rate available in the open market
is frequently lower than what is available through other borrowing channels. Municipal bonds are one of
several ways states, cities and counties can issue debt. Other mechanisms
include certificates
of participation and lease-buyback agreements. While these
methods of borrowing differ in legal structure, they are similar to the
municipal bonds described in this article. One of the primary reasons
municipal bonds are considered separately from other types of bonds is their
special ability to provide tax-exempt income. Interest paid by the issuer to
bond holders is often exempt from all federal taxes, as well as state or
local taxes depending on the state in which the issuer is located, subject to
certain restrictions. Bonds issued for certain purposes are subject to the
alternative minimum tax. The type of project or
projects that are funded by a bond affects the taxability of income received
on the bonds held by bond holders. Interest earnings on bonds that fund
projects that are constructed for the public good are generally exempt from
federal income tax, while interest earnings on bonds issued to fund projects
partly or wholly benefiting only private parties, sometimes referred to as
private activity bonds, may be subject to federal income tax. The laws governing the
taxability of municipal bond income are complex; however, bonds are typically
certified by a law firm as either tax-exempt (federal and/or state income
tax) or taxable before they are offered to the market. Purchasers of
municipal bonds should be aware that not all municipal bonds are tax-exempt. The risk ("security")
of a municipal bond is a measure of how likely the issuer is to make all
payments, on time and in full, as promised in the agreement between the
issuer and bond holder (the "bond documents"). Different types of
bonds carry different securities, based on the promises made in the bond
documents:
In addition, there are
several other types of municipal bonds with different promises of security. |
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The tool of choice is the
Fed’s ability to influence the direction of interest rates. When interest
rates are low, working capital is easier to obtain. This can spur economic
development because, the more cash you have available, the more you are
likely to pay for something you want . Left unchecked, however, and the
result is “too much money chasing too few goods,” as the saying goes.
Unfortunately this leads to inflation as businesses realize they can charge
higher prices for their goods and services. Suddenly, it costs you more for
just about everything, as they are most often tied together in one way or
another, the cost increases passed on from one supplier to the next, and of
course, ends up at the check out stand. If interest rates are
too high,
however, the result can be a recession and, in extreme cases, deflation; the
result of which can be devastating for most of the economy. The discount rate is the interest rate banks are charged
when they borrows funds overnight directly from one of the Federal Reserve
Banks. When the cost of money increases for your bank, they are going to
charge you more as a result. This makes capital more expensive and results in
less borrowing. Spending goes down, this, it becomes more difficult for
prices to rise; the opposite being true when capital becomes less expensive
due to a decrease in the discount rate. The Federal funds rate is the rate that banks charge each
other for overnight loans. The first question comes to mind, why do banks
borrow from each other, the answer, the Fed can (and does) require banks to
keep a certain percentage of assets in the form of cash on hand or deposited
in one of the Federal Reserve banks. From time to time, it will establish a
required ratio of reserves to deposits; when this ratio is increased, more
cash must be kept in the vault at night, making it more difficult (and
expensive) for funds to be acquired. When the reserve requirement is lowered,
the money supply is loosened; because less cash has to be kept on hand it
becomes easier to acquire capital. The much heralded monthly Federal Reserve meeting is piloted by its Federal Open Market Committee, it targets a specific level for the federal funds rate. This rate directly influences other short-term interest rates, such as deposits, bank loans, credit card interest rates, and adjustable rate mortgages. The stock market watches the monthly FOMC meetings very
closely, as it has a profound and sometimes dramatic effect on the market. It
might seem a small amount, but, a 1/4 point decline in the rate not only
stimulates economic growth, but sends the markets higher, unfortunately if it
stimulates too much growth, inflation will raise its ugly head. Surprisingly, a 1/4
increase in the rate will curb inflation, but has the ability to slow growth
and prompt a decline in the markets. Stock market analysts are ever watchful
and with a cocked ear for any casual uttered statement by anyone on or
associated with the Federal Open (FOMC) Market Committee, trying to get a
clue as to what the Feds next move might be. |
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If you are turned down for
credit or find an error in your credit (which is free, from the three major
reporting agencies) report, you are entitled to have it investigated by
the credit bureau and corrected at no charge. However, if negative
information on your credit file is accurate, then only time and responsible
credit habits can help restore a bad credit history. |
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Derivatives are financial contracts, or
financial instruments, whose values are derived from the value of something
else (known as the underlying). The underlying on which a derivative is based
can be a credit derivatives based on loans, bonds or other forms of credit. The main types of derivatives are forwards, futures,
options, and swaps. Derivatives can be used to mitigate the risk of
economic loss arising from changes in the value of the underlying. This
activity is known as hedging. Alternatively, derivatives can be used by
investors to increase the profit arising if the value of the underlying moves
in the direction they expect. This activity is known as speculation. Because the value of a derivative is contingent on the
value of the underlying, the notional value of derivatives is recorded off
the balance sheet of an institution, although the market value of derivatives
is recorded on the balance sheet In finance a hedge is a position established in one
market in an attempt to offset exposure to the price risk of an equal but
opposite obligation or position in another market — usually, but not always,
in the context of one's commercial activity. Hedging is a strategy designed
to minimize exposure to such business risks as a sharp contraction in demand
for one's inventory, while still allowing the business to profit from
producing and maintaining that inventory. Some form of risk taking is inherent to any business
activity. Some risks are considered to be "natural" to specific
businesses, such as the risk of oil prices increasing or decreasing is
natural to oil drilling and refining firms. Other forms of risk are not
wanted, but cannot be avoided without hedging. Someone who has a shop, for
example, expects to face natural risks such as the risk of competition, of
poor or unpopular products, and so on. The risk of the shopkeeper's inventory
being destroyed by fire is unwanted, however, and can be hedged via a fire
insurance contract. Not all hedges are financial instruments: a producer that
exports to another country, for example, may hedge its currency risk when
selling by linking its expenses to the desired currency. Banks and
other financial institutions use hedging to control their asset-liability
mismatches, such as the maturity matches between long, fixed-rate loans and
short-term (implicitly variable-rate) deposits. A hedger (such as a manufacturing company) is thus
distinguished from an arbitrageur or speculator. (Such as a bank or brokerage firm) in derivative purchase
behavior. A derivative
instrument (or simply derivative) is a financial instrument, which derives
its value from the value of some other financial instrument or variable. For
example, a stock option is a derivative
because it derives its value from the value of a stock. An interest
rate swap is a derivative
because it derives its value from one or more interest rate indices. The
value(s) from which a derivative derives its value is called its underlier(s). By contrast, we might speak of primary instruments,
although the term cash instruments is more common. A cash instrument is an
instrument whose value is determined directly by markets. Stocks,
commodities, currencies and bonds are all cash
instruments. The distinction between cash and derivative instruments is not
always precise, but it is a useful informal distinction. Derivative
instruments are categorized in various ways. One is the distinction between
linear and non-linear derivatives. The former have payoff diagrams that are
linear or almost linear. The latter has payoff diagrams that are highly
non-linear. Such non-linearity is always due to the derivative either being an
option or having an option embedded in its structure. A somewhat arbitrary distinction
is between vanilla and exotic derivatives. The former tend to be simple and
more common; the latter more complicated and specialized. There is no
definitive rule for distinguishing one from the other, so the distinction is
mostly a matter of custom. |
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The basic
types of auto insurance coverages are: |
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There
are several types of residential insurance policies. The HO-4 policy is
designed for renters, while the HO-6 policy is for condo owners. Both HO-4
and HO-6 cover losses to your personal property from 16 types of perils:
*Policies designed for
condominium owners primarily cover contents. However, there is a small
provision included to cover the portions of the dwelling that are your
insurance responsibility as defined by the governing rules of the
condominium. Generally, additional dwelling coverage may be purchased if the
provision included in the package is not sufficient. ** Renting a
Residence – If you are renting a residence,
coverage for your contents is available through renter’s insurance |
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Brokerage firms generally
are classified as full service, discount, or online organizations. Investors
who do not have time to research investments on their own will likely rely on
a full service broker to help them construct an investment portfolio, manage
their investments, or make recommendations regarding which investments to
buy. Full service brokers have access to a wide range of reports and analyses
from the company�s large staff of financial analysts.
These analysts research companies and recommend investments to people with
different financial needs. Persons who prefer to select their own investments
generally use a discount or online broker and pay lower commission charges.
Discount firms usually do not offer advice about specific securities. Online
brokerage firms make their trades over the Internet in order to keep costs
down and fees low. Discount brokerage firms usually have branch offices,
while online firms do not. Most brokerage firms now have call centers staffed
with both licensed sales agents and customer service representatives who take
orders and answer questions at all hours of the day. Brokerage firms also
provide investment banking services; that is, they act as intermediaries
between those companies or governments which would like to raise money and
those with money or capital to invest. Investment banking usually involves
the firm buying initial stock or bond offerings from private companies or
from Federal, State, and local governments and, in turn, selling them to
investors for a potential profit. This service can be risky, especially when
it involves a new company selling stock to the public for the first time. Investment
bankers must try to determine the value of the company on the basis of a
number of factors, including projected growth and sales, and decide what
price investors are willing to pay for the new stock. Investment bankers also
advise businesses on merger and acquisition strategies and may arrange for
the transfer of ownership. Companies that specialize
in providing investment advice, portfolio management, and trust, fiduciary,
and custody activities also are included in this industry. These companies range
from very large mutual fund management companies to self-employed personal
financial advisors or financial planners. Also included are managers of
pension funds, commodity pools, trust funds, and other investment accounts.
Portfolio or asset management companies direct the investment decisions for
investors who have chosen to pool their assets in order to have them
professionally managed. Many brokerage firms also provide these services.
Personal financial advisors can manage investments for individuals as well,
but their main objective is to be able to provide advice on a wide range of
financial matters .
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General
information
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Lender |
Phone #1 |
Phone #2 |
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Bank of America |
(800) 846-2222 |
(716) 635-2264 |
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Chase Home Finance |
(800) 848-9136 |
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Chase Home Finance |
(800) 526-0072 |
(800) 527-3040 |
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CitiMortgage |
(800) 926-9783 |
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Countrywide |
(800) 763-1255 |
(800) 669-4576 |
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(800) 338-6441 |
(888) 648-3124 |
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Irwin Mortgage Corporation |
(888) 444-6446 |
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James B. Nutter & Company |
(800) 315-7334 |
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Midland Mortgage |
(800) 552-3000 |
(800) 654-4566 |
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Mortgage Service |
(800) 449-8767 |
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(800) 367-9305 |
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Nationwide Advantage Mortgage |
(800) 356-3442 |
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Principal Residential Mortgage,
Inc. |
(800) 367-6448 |
(800) 962-4450 |
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Sun Trust Mortgage |
(800) 443-1032 |
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Wells Fargo Mortgage |
(800) 766-0987 |
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Wendover Financial Services
Corporation |
(888) 934-1081 |
(800) 436-1022 |
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Washington Mutual Home Loans,
Inc. |
(866) 926-8937 |
(800) 254-3677 |
This information is provide
for you by the joint efforts of HUD/FHA, Department of Veterans Affairs,
Department of Labor, Fannie Mae, Freddie Mac, members of the Mortgage
Industry-at-large, and other industry participants.
Servicemembers Civil Relief Act (SCRA) Common Questions - (Top)
Who is eligible?
Am I entitled to debt
payment relief?
Is the interest rate
limitation automatic?
Am I eligible even if I
can afford to pay my mortgage at a higher interest rate?
What if I can't afford to
pay my mortgage even at the lower rate?
Am I protected against foreclosure?
What information do I need
to provide to my lender?
Will my payments change
later?
Will I need to pay back
the interest rate "subsidy" at a later date?
How long does the benefit
last? Does the period begin and end with my tour of duty?
How can I learn more about
relief available to active duty military personnel?
Reservists, guardsmen and
other military personnel can find answers to questions about mortgage payment
relief and protection from foreclosure provided by the Service members Civil Relief Act of 2003 (formerly The
Soldiers' and Sailors' Civil Relief Act of 1940).
Who
is eligible? -
(Top)
The Act applies to active
duty military personnel who had a mortgage obligation before enlistment or
before being ordered to active duty. This includes:
- Members
of the Army, Navy, Marine Corps, Air Force, Coast Guard
- Commissioned
officers of the Public Health Service and the National Oceanic and
Atmospheric Administration engaged in active service
- Reservists
ordered to report for military service
- People
ordered to report for induction (training) under the Military Selective
Service Act
- Guardsmen
called to active service for more than 30 consecutive days.
In limited situations,
dependents of servicemembers are also entitled to protections.
Am I
entitled to debt payment relief? - (Top)
The Act limits interest
that may be charged on mortgages taken out by a servicemember (including
debts incurred jointly with a spouse) before he or she entered into active
military service. At your request, lenders must reduce the interest rate to
no more than 6% per year during the period of active military service and
recalculate your payments to reflect the lower rate. This provision applies
to both conventional and government-insured mortgages.
Is
the interest rate limitation automatic? - (Top)
No. To ask for this
temporary interest rate reduction, you must submit a written request to your
mortgage lender and include a copy of your military orders. The request may
be submitted as soon as the orders are issued, but no later than 180 days
after the date of your release from active duty military service.
Am I
eligible even if I can afford to pay my mortgage at a higher interest rate? - (Top)
If a mortgage lender
believes that military service has not affected your ability to repay your
mortgage, they have the right to ask a court to grant relief from the
interest rate reduction. This is does not happen very often.
What
if I can't afford to pay my mortgage even at the lower rate?- (Top)
Your mortgage lender may
let you stop paying the principal amount due on your loan during active duty
service. Lenders are not required to do this but they generally try to work
with servicemembers to keep them in their homes. You will still owe this
amount, but will not have to repay it until after you complete active duty
service.
Most lenders also have
other programs to assist borrowers who can't make their mortgage payments. If
you or your spouse finds yourself in this position at any time before or
after active duty service, contact your lender immediately and ask about loss
mitigation options. If you have an FHA-insured loan and are having difficulty
making mortgage payments, you may also be eligible for special forbearance and
other loss mitigation options.
Am I
protected against foreclosure?
- (Top)
Mortgage lenders may not
foreclose while you are on active duty or within 90 days after military
service without court approval., A lender would be required to show in court
that your ability to repay the debt was not affected by your military
service.
What
information do I need to provide to my lender? - (Top)
When you or your
representative contacts your mortgage lender, you should provide the
following information:
- Notice
that you have been called to active duty
- A
copy of the orders from the military notifying you of your activation
- Your
FHA case number
- Evidence
that the debt precedes your activation date
HUD has reminded FHA
lenders of their obligation to follow the SCRA. When notified that a borrower
is on active military duty, an FHA lender must inform the borrower or
representative of the adjusted payment amount due, provide adjusted coupons
or billings, and ensure adjusted payments are not considered insufficient
payments.
Will
my payments change later?
Will I
need to pay back the interest rate "subsidy" at a later date?
- (Top)
The change in interest rate
is not a subsidy. Interest in excess of 6% per year that would otherwise have
been charged is forgiven. However, the reduction in the interest rate and
monthly payment amount only applies during the period of active duty. Once
the period of active military service ends, the interest rate will revert
back to the original interest rate, and payments will be recalculated
accordingly.
How
long does the benefit last? Does the period begin and end with my tour of
duty? - (Top)
Interest rate reductions
are only for the period of active military service. Other benefits, such as
postponement (delaying) of monthly principal payments on the loan and
restrictions on foreclosure, may begin immediately upon assignment to active
military service and end on the third month following the term of active duty
assignment.
How
can I learn more about relief available to active duty military personnel? - (Top)
Servicemembers who have
questions about the SCRA or the protections they may be entitled to, can
contact their unit judge advocate or installation legal assistance officer.
Dependents of servicemembers can also contact or visit local military legal
assistance offices where they live. A military legal assistance office
locator for each branch of the armed forces is available at www.legalassistance.law.af.mil/content/locator.php
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The fasted growing crime in the US and it is not even done
in the presence of the victim. Most often the crime is performed on-line, by
mail, on the telephone, or on a fax-based transactions, This crime is
known as non-self revealing.
TransUnion, Equifax, Experian are the major credit
reporting agencies in the US. -Do you look over your monthly credit card statement each
month to make sure there aren't any charges showing up that are not yours? If
there are charges not initiated by you, immediately contact that company. |
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· Realtor
commissions -
typically 5-7% (7% is actually very high) of the selling price. (It is a good
idea to shop around at several different real estate agencies to determine
which one offers the greatest value for the money). · Closing
costs, including
attorney, and other professional fees. ( Next to the commission on the sale
of the home, closing costs are often the biggest expense of selling a home.
One of the costliest parts of closing costs is often title insurance. In most
cases title insurance ranges between $800 and $1,800, and varies according to
region, and rise with the cost of the home. · Excise
taxes on the sale.
(Some states are authorized to levy a real estate excise tax on all sales of
real estate, measured by the full selling price, including the amount of any
liens, mortgages and other debts given to secure the purchase. · Property
taxes and any homeowner association fees. (These are always pro-rated, split by the buyer and seller,
the amount set by the due dates on them).
Capital gain tax on home
sale:
The
federal Taxpayer Relief Act of 1997 says when you sell your home you can
keep, tax free, capital gains of up to $500,000 if you are married filing
jointly or $250,000 for single taxpayers, or married taxpayers who file
separately. To qualify for the exclusion, you must have used the home as your
principle residence for at least two of the prior five years. It is not a one
time tax exclusion. You can use the exclusion as often as you meet the
qualifications. The
federal Internal Revenue Service Restructuring and Reform Act of 1998 further
clarified the law and says you can prorate the $500,000/$250,000 exclusion
(not your specific gain) if unforeseen events, such as a job change, illness,
or some other hardship forced you to sell before you meet the two-year
residency requirement. |
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The common denominator of those who have achieved financial
success "Extreme Integrity" |
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If your employer offers a
401(k) plan, it makes a lot of sense to participate in it as soon as
possible. If you start early you can very likely have a million or more
dollars in your account by the time you retire. The primary advantages to a
401(k) are that the money is contributed before it is taxed and your employer
may be matching your contribution with company money. There is a small downside to the employer contribution,
this being a "vesting schedule". Vesting means that there is
usually a tiered schedule for when money the employer contributes to your
account is actually yours. For example, your employer may have a three-year
vesting schedule that increases your ownership of the money by one-third each
year. After three years, the money is all yours and all future contributions
are 100-percent yours.
Congress declared in 1978
that Americans needed a bit of encouragement to save more money for
retirement, and not entirely depending on Social Security. They thought that
if they gave people a way to save for retirement while at the same time
lowering their state and federal taxes, they might just take advantage of it.
The Tax Reform Act was passed. Part of it authorized the creation of a
tax-deferred savings plan for employees. The plan got its name from its
section number and paragraph in the Internal Revenue Code -- section 401,
paragraph (k). 401(k) plans are part of a family of retirement plans known as "defined contribution" plans. Other defined contribution plans include profit sharing plans, IRAs and Simple IRAs, SEPs, and money purchase plans. They are called "defined contribution plans" because the amount that is contributed is defined either by you the employee or the employer. In a nut shell: -When you participate in a
401(k) plan, you tell your employer how much money you want to go into the
account. You can usually put up to 15 percent of your salary into the account
each month, but the employer has the right to limit that amount. It might be
worth your while to rally for a higher limit if it isn't as high as you would
like it to be. The IRS limits your total annual contribution. -The money you contribute
comes out of your check "before taxes are calculated", and
more importantly, before you have the opportunity to spend it. That makes the
401(k) one of the most effective ways to save for your retirement. -Usually, by
not always, your employer will match a portion of your contribution. |
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Mutual funds can invest in
many different kinds of securities. The most common are cash, stock, and
bonds, but there are hundreds of sub-categories. Stock funds, for instance, can
invest primarily in the shares of a particular industry, such as technology
or utilities. These are known as sector
funds. Bond funds can vary according to risk ( high-yield junk bonds
or investment-grade corporate bonds), type of issuers are government
agencies, corporations, or municipalities, or maturity of the bonds (short-
or long-term). Both stock and bond funds can invest in primarily U.S. securities
(domestic funds), both U.S. and foreign securities (global funds), or
primarily foreign securities (international funds). Most mutual funds'
investment portfolios are continually adjusted under the supervision of a
professional manager, who forecasts the future performance of investments
appropriate for the fund and chooses those which he or she believes will most
closely match the fund's stated investment objective. A mutual fund is
administered through a parent management company, which may hire or fire fund
managers. Mutual funds are liable to
a special set of regulatory, accounting, and tax rules. Unlike most other
types of business entities, they are not taxed on their income as long as
they distribute substantially all of it to their shareholders. Also, the type
of income they earn is often unchanged as it passes through to the
shareholders. Mutual fund distributions of tax-free municipal bond income are
also tax-free to the shareholder. Taxable distributions can be either ordinary
income or capital gains, depending on how the fund earned those
distributions. Mutual funds
offer several advantages over investing in individual stocks. For example,
the transaction costs are divided among all the mutual fund shareholders, who
also benefit by having a third party (professional fund managers) apply their
expertise, dedicate their time to manage and research investment options.
However, despite the professional management, mutual funds are not immune to
risks. They share the same risks associated with the investments made. If the
fund invests primarily in stocks, it is usually subject to the same ups and
downs and risks as the stock market. |
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This is when investor
purchases a house at a considerable discount from market (estate,
foreclosure) value. The price may also be due to the condition of the
property, such as the need for major renovations and/or repairs needed or the
owner(s) needing to sell a house quickly, for whatever reason. The investor will then
perform necessary renovations and repairs, and attempt to make a profit by
selling the house quickly at a price nearer to full market value, hence,
"Flip". Many investors do this on
full-time basis, and some do very well. They have done their homework and
understand the various hurdles they will encounter. Unfortunately, there is an adverse financial aspect to those
who participate in "flipping", when interest rates go up, the cause
and effect resulting in lack of sales, and major price depreciations (often
far below) their previous increases, results in a excessive properties on the
market at one time, obviously not selling due to lack of buyers, due to the
increase in interest they would have to pay, consequently causing a serious
downturn in local market and potentially the economy as a whole causing a
domino effect. Here the investor is really in trouble, since they are paying
the mortgage, putting time and money in the property, as well as taxes and
insurance, having to ride it out, until the real estate market returns, which
on occassion can be a few years. The method of escape from the property is
precisely why you see so many TV commercials attesting to those
"flippers" telling you how many LLC or Corporations they own, as
that is some badge of success, well it is not. All this does is to provide
them the opportunity to walk away from the property, giving it back to the
lender.Their liability being the actual dollars they have invested. |
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Day traders quickly buy and
sell stocks (sometimes only seconds to minutes) continuously in hopes that
their stocks will continue climbing or falling in value for the very short
period, they own the stock, allowing them to quickly lock in quick profits.
Day traders usually buy on borrowed money, hoping that they will reap higher
profits through leverage, but also running the risk of higher losses. Day trading is highly risky
and it is not illegal. Most individual investors do not have the temperament
to be a day trader, as well as be able to sustain the devastating losses that
day trading can bring. But if you are successful, the gains are sometimes
substantial.
A few pointers about
day trading: -Day traders live their life in front of their computer
screen, looking for a stock that is either moving up or down in value. They
want to ride the momentum of the stock and get out of the stock before it
changes direction. They do not know for certain how the stock will move, they
are hoping that it will move in one direction, either up or down in value.
True day traders do not own any stocks overnight, because of the extreme risk
that prices will change radically from one day to the next, leading to some
very big losses. -Don't
believe snake oil claims that promise sure profits from day trading. Before
you start trading with a firm, find out about them. Do some research, find
out the percentage of their clients that are actually making money and how
many are not. If the firm does not know, or will not tell you, think twice
about the risks you take in the face of ignorance. |
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If you are in the market for credit, a home equity plan
may be right for you. Or perhaps another form of credit would be better.
Before making a decision, you should weigh carefully the costs of a home
equity line against the benefits. Shop for the credit terms that best meet
your borrowing needs without posing undue financial risk. And remember,
failure to repay the amounts you've borrowed, plus interest, could mean the
loss of your home. A home equity line of credit is a form of revolving
credit in which your home serves as collateral. Because the home is likely to
be a consumer's largest asset, many homeowners use their credit lines only
for major items such as education, home improvements, or medical bills and
not for day-to-day expenses. With
a home equity line, you will be approved for a specific amount of
credit--your credit limit, the maximum amount you may borrow at any one time under
the plan. Many lenders set the credit limit on a home equity line by taking a
percentage (say, 75 percent) of the home's appraised value and subtracting
from that the balance owed on the existing mortgage. Many home equity plans set a fixed period during which
you can borrow money, such as 10 years. At the end of this "draw
period," you may be allowed to renew the credit line. If your plan does
not allow renewals, you will not be able to borrow additional money once the
period has ended. Some plans may call for payment in full of any outstanding
balance at the end of the period. Others may allow repayment over a fixed
period (the "repayment period"), for example, 10 years. Once approved for a home equity line of credit, you
will most likely be able to borrow up to your credit limit whenever you want.
Typically, you will use special checks to draw on your line. Under some
plans, borrowers can use a credit card or other means to draw on the line. There may be limitations on how you use the line. Some
plans may require you to borrow a minimum amount each time you draw on the
line (for example, $300) and to keep a minimum amount outstanding. Some plans
may also require that you take an initial advance when the line is set up.
If you decide to apply for a home equity line of
credit, look for the plan that best meets your particular needs. Read the
credit agreement carefully, and examine the terms and conditions of various
plans, including the annual
percentage rate (APR)
and the costs of establishing the plan. The APR for a home equity line is
based on the interest rate alone and will not reflect the closing
costs
and other fees and charges, so you'll need to compare these costs, as well as
the APRs, among lenders. Interest rate charges and related plan
features Lenders sometimes offer a temporarily discounted
interest rate for home equity lines--a rate that is unusually low and may
last for only an introductory period, such as 6 months. Variable-rate plans secured by a dwelling must, by law,
have a ceiling (or cap) on how
much your interest rate may increase over the life of the plan. Some
variable-rate plans limit how much your payment may increase and how low your
interest rate may fall if interest rates drop. Some lenders allow you to convert from a variable
interest rate to a fixed rate during the life of the plan, or to convert all
or a portion of your line to a fixed-term installment loan. Plans generally permit the lender to freeze or reduce
your credit line under certain circumstances. For example, some variable-rate
plans may not allow you to draw additional funds during a period in which the
interest rate reaches the cap. Costs of establishing and maintaining a
home equity line
In addition, you may be subject to certain fees during
the plan period, such as annual
membership or maintenance fees
and a transaction
fee
every time you draw on the credit line. You could find yourself paying hundreds of dollars to
establish the plan. If you were to draw only a small amount against your
credit line, those initial charges would substantially increase the cost of
the funds borrowed. On the other hand, because the lender's risk is lower
than for other forms of credit, as your home serves as collateral, annual
percentage rates for home equity lines are generally lower than rates for
other types of credit. The interest you save could offset the costs of
establishing and maintaining the line. Moreover, some lenders waive some or
all of the closing costs.
Before entering into a plan, consider how you will pay back the money you borrow. Some plans set minimum payments that cover a portion of the principal (the amount you borrow) plus accrued interest. But (unlike with the typical installment loan) the portion that goes toward principal may not be enough to repay the principal by the end of the term. Other plans may allow payment of interest alone during the life of the plan, which means that you pay nothing toward the principal. If you borrow $10,000, you will owe that amount when the plan ends. Regardless of the minimum required payment, you may
choose to pay more, and many lenders offer a choice of payment options. Many
consumers choose to pay down the principal regularly as they do with other
loans. For example, if you use your line to buy a boat, you may want to pay
it off as you would a typical boat loan. Whatever your payment arrangements during the life of
the plan--whether you pay some, a little, or none of the principal amount of
the loan--when the plan ends you may have to pay the entire balance owed, all
at once. You must be prepared to make this "balloon
payment"
by refinancing it with the lender, by obtaining a loan from another lender,
or by some other means. If you are unable to make the balloon payment, you
could lose your home. If your plan has a variable interest rate, your monthly
payments may change. Assume, for example, that you borrow $10,000 under a
plan that calls for interest-only payments. At a 10 percent interest rate,
your monthly payments would be $83. If the rate rises over time to 15
percent, your monthly payments will increase to $125. Similarly, if you are
making payments that cover interest plus some portion of the principal, your
monthly payments may increase, unless your agreement calls for keeping
payments the same throughout the plan period. If you sell your home, you will probably be required to pay off your home equity line in full immediately. If you are likely to sell your home in the near future, consider whether it makes sense to pay the up-front costs of setting up a line of credit. Also keep in mind that renting your home may be prohibited under the terms of your agreement.
If you are thinking about a home equity line of credit,
you might also want to consider a traditional second mortgage loan. A second
mortgage provides you with a fixed amount of money repayable over a fixed
period. In most cases the payment schedule calls for equal payments that will
pay off the entire loan within the loan period. You might consider a second
mortgage instead of a home equity line if, for example, you need a set amount
for a specific purpose, such as an addition to your home. In deciding which type of loan best suits your needs, consider the costs under the two alternatives. Look at both the APR and other charges. Do not, however, simply compare the APRs, because the APRs on the two types of loans are figured differently:
The federal Truth in Lending Act requires lenders to
disclose the important terms and costs of their home equity plans, including
the APR, miscellaneous charges, the payment terms, and information about any
variable-rate feature. And in general, neither the lender nor anyone else may
charge a fee until after you have received this information. You usually get
these disclosures when you receive an application form, and you will get
additional disclosures before the plan is opened. If any term (other than a variable-rate
feature) changes before the plan is opened, the lender must return all fees
if you decide not to enter into the plan because of the change. When you open a home equity line, the transaction puts
your home at risk. If the home involved is your principal dwelling, the Truth
in Lending Act gives you 3 days from the day the account was opened to cancel
the credit line. This right allows you to change your mind for any reason.
You simply inform the lender in writing within the 3-day period. The lender
must then cancel its security interest in your home and return all fees--including any
application and appraisal fees--paid to open the account. |
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Quick Tip: There's no such as thing as "Get rich quick." That which can be achieved in one day, could be gone the next! |
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Investment strategies vary by hedge funds, each
offering different degrees of risk and return. A macro hedge fund, for
example, invests in stock and bond markets and other investment
opportunities, such as currencies, in hopes of profiting on significant
shifts in such things as global interest rates and countries’ economic
policies. A macro hedge fund is more volatile but potentially faster growing
than a distressed-securities hedge fund that buys the equity or debt of
companies about to enter or exit financial distress. An equity hedge fund may
be global or country specific, hedging against downturns in equity markets by
shorting overvalued stocks or stock indexes. A relative value hedge fund
takes advantage of price or spread inefficiencies. Knowing and understanding
the characteristics of the many different hedge fund strategies is essential
to capitalizing on their variety of investment opportunities. A wide range of hedging strategies are available to
hedge funds. For example: --Selling short - selling shares without owning them,
hoping to buy them back at a future date at a lower price in the expectation
that their price will drop.
Less
than 5% of hedge funds are global macro funds. Most hedge funds use
derivatives only for hedging or don't use derivatives at all, and many use no
leverage.
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You can "bid" for a bill in two ways:
Your
Bid may be: To place a noncompetitive bid, you may use
TreasuryDirect, Legacy Treasury Direct, or a bank, broker, or dealer. To place a competitive bid, you must use a bank,
broker, or dealer. In a nut shell: Treasury Bills are,
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1/4 of 1 percent of Americans are
worth 10 Million dollars and make $750,000 or more per year. |
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Quick Tip: Make sure your new insurance
policy is in effect before dropping your
old one, or you could be very sorry. |
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Quick Tip: Be cautious in taking out Home Equity Loans. These loans reduce
the equity that you have built up in your home.
If you are unable to
make payments, "you could lose
your home". |
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According to the EPA's Energy Star
Program, Home electronics accounts for in excess of 15 prcent of all
residential electric
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Annual
Percentage Rate (APR) ATM
Card Balance
Computation Methods
Bankruptcy Co-Branded
Card Consumer
Credit Counseling Service (CCCS) Credit
Reporting Agencies Credit
Card Credit
Card Insurance Credit
Line Credit
Report Debit
Card Endorsed
Card Equal
Credit Opportunity Act (Implemented by Federal Reserve Regulation B) Fair
Credit Billing Act Finance
Charge Fixed
APR Grace
Period Interest
Rate Introductory
APR LIBOR
(London interbank offered rates) Minimum
Payment Previous
Balance Prime
Rate Principal Purchasing
Card Secured
Card Transaction
Fees Truth
in Lending Act (Implemented by Federal Reserve Regulation Z) Variable APR If you are trying to pay
off a balance, most likely you are looking for a card that offers a teaser rate (or
"special" rate, "promotional" rate,
"limited-time-only" rate). It is simply the Very Special Interest
Rate the lender is offering at that time. As with most teasers, there are time
limits attached. Teaser and introductory rates are usually offered for both
fixed rate and variable rate cards. In all promotional materials for cards
carrying a teaser rate, you'll see reference to an "ongoing APR,"
as well. That is the interest rate you will be charged on balances once the
introductory "teaser rate" period has ended. |
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Fight identity theft by monitoring and reviewing your credit report. You may request your free credit report online You
have the right to ask that nationwide consumer credit reporting companies
place "fraud alerts" in your file to let potential creditors and
others know that you may be a victim of identity theft · Equifax: 1-877-576-5734; www.equifax.com
· Experian: 1-888-397-3742; www.experian.com/fraud
· TransUnion: 1-800-680-7289; www.transunion.com
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LifeLock = Helps protect your personal information.
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Quick Tip: Seniors control 79% of America's Financial
Assets. Seniors also spend $14 Billion Annually on gifts just for their
grandchildren. On average Seniors have over 26% more disposable income than
other consumers. |
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The expiration of options contributes to the once-per-quarter "triple-witching day," the day on which three derivative instruments all expire on the same day. Stock index futures, stock index options and options on individual stocks all expire on this day, and because of this, trading volume is usually especially high on the stock exchanges that day. In 1987, the expiration of key index contracts was changed from the close of trading on that day to the open of trading on that day, which helped reduce the volatility of the markets somewhat by giving specialists more time to match orders. You will frequently hear about both volume and open interest in reference to options (really any derivative contract). Volume is quite simply the number of contracts traded on a given day. The open interest is slightly more complicated. The open interest figure for a given option is the number of contracts outstanding at a given time. The open interest increases (you might say that an open interest is created) when trader A opens a new position by buying an option from trader B who did not previously hold a position in that option (B wrote the option, or in the lingo, was "short" the option). When trader A closes out the position by selling the option, the open interest either remain the same or go down. If A sells to someone who did not have a position before, or was already long, the open interest does not change. If A sells to someone who had a short position, the open interest decreases by one. |
Reverse
Mortgage
Reverse
Mortgages: Get the Facts Before Cashing in on Your
Home's Equity
Whether
seeking money to finance a home improvement, pay off a current mortgage,
supplement their retirement income, or pay for healthcare expenses, many
older Americans are turning to “reverse” mortgages. They allow older
homeowners to convert part of the equity in their homes into cash without
having to sell their homes or take on additional monthly bills. In
a “regular” mortgage, you make monthly payments to the lender. But in a
“reverse” mortgage, you receive money from the lender and generally don’t
have to pay it back for as long as you live in your home. Instead, the loan
must be repaid when you die, sell your home, or no longer live there as your
principal residence. Reverse mortgages can help homeowners who are house-rich
but cash-poor stay in their homes and still meet their financial obligations. To
qualify for most reverse mortgages, you must be at least 62 and live in your
home. The proceeds of a reverse mortgage (without other features, like an
annuity) are generally tax-free, and many reverse mortgages have no income
restrictions. Loan
Features: Reverse
mortgage loan advances are not taxable, and generally do not affect Social
Security or Medicare benefits. You retain the title to your home and do not
have to make monthly repayments. The loan must be repaid when the last
surviving borrower dies, sells the home, or no longer lives in the home as a
principal residence. In the HECM program, a borrower can live in a nursing
home or other medical facility for up to 12 months before the loan becomes
due and payable.
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Buying
on margin means that you are buying your stocks with borrowed money. If
you are buying stocks in cash, you pay $10,000 for 100 shares of a stock that
costs $100 a share. consequently, they are free and clear. But
when you buy on margin, you are borrowing the money to purchase the stock.
For example, you don't have $10,000 for those 100 shares. A brokerage firm
could lend you up to 50% of that in order to purchase the stock. All you need
is $5,000 to buy the 100 shares of stock. Most
brokerage firms set a minimum amount of equity at $2,000. In other words, you
you have to put in at least $2,000 for the purchase of stocks. In
return for the loan, you pay interest, either upfront, or against your stock.
The brokerage is making money on your loan. They will also hold your stock
as collateral against the loan. If you default, they will take the
stock. They are exposed to little risk in the deal. The
price of your stock could always go down. By law, the brokerage will not be
allowed to let the value of the collateral (the price of your stock) go down
below a certain percentage of the loan value. If the stock drops below that
set amount, the brokerage will issue a margin call, which means that
you will have to pay the brokerage the amount of money necessary to bring the
brokerage firms risk down to the allowed level. If you don't have the money,
your stock will be sold to pay off the loan. In most cases, there is little
of your original investment remaining after the stock is sold, or if may have
fallen so far, you have to make up the difference.. Buying
on margin could mean a huge return. But there is the risk that you could lose
your original investment. As with any stock purchase there are risks, but
when you are using borrowed money, the risk is increased. Buying
on margin is usually not a good idea for the beginner or normal, every day
investor. It is something that sophisticated investors even have issues with.
The risk can be high. Make sure that you understand all of the possible
scenarios that could happen, good and bad. Suggestions
from the professionals:
If executed
correctly, margin stategy can provide for huge profits. The flip side,
you can lose your entire investment and any other assets you have. Do Not
venture into this aspect without understanding what you're doing. |
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Quick Tip: Read the Fine Print! and "Beware" of Subprime
or Alt-A loans. They are somewhat riskier in nature than A credit, prime, or
traditional loans. If you can't afford to buy it, DON'T. |
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When
seeking a pre-approval, it's important not to misrepresent the facts on your
application. If a lender learns later that you've misrepresented or omitted
information on your application, your pre-approval may be rescinded. Once
you find the home you want to buy, the next step is to write an offer – which
is not as easy as it sounds. Your offer is the first step toward negotiating
a sales contract with the seller. Since this is just the beginning of
negotiations, you should put yourself in the sellers shoes and imagine his or
her reaction to everything you include. Your goal is to get what you want,
and imagining the sellers reactions will help you attain that goal. The
offer is much more complicated than simply coming up with a price and saying,
"This is what I will pay." Because of the huge dollar amounts
involved, especially in today's litigious society, both you and the seller
want to build in protections and contingencies to protect your investment and
limit your risk. In
an offer to purchase real estate, you include not only the price you are
willing to pay, but other details of the purchase as well. This includes how
you intend to finance the home, your down payment, who pays what closing
costs, what inspections are performed, timetables, whether personal property
is included in the purchase, terms of cancellation, any repairs you want
performed, which professional services will be used, when you get physical
possession of the property, and how to settle disputes should they occur. In
most purchase transactions there usually some dips in the road, but
they usually smooth out. There is one issue that you want to deal with, your
anticipating potential problems so that if something does go wrong, you can
cancel the contract without penalty. These are called
"contingencies" and you must be sure to include them when you offer
to buy a home. For
example, some "move-up" buyers often agree to purchase a home
before selling their previous home. Even if the home is already sold, it is
probably a "pending sale" and has not closed. Therefore, you should
make closing your own sale a condition of your offer. If you do not include
this as a contingency, you may find yourself making two mortgage payments
instead of one. There
are other common contingencies you should include in your offer. Since you
probably need a mortgage to buy the home, a condition of your offer should be
that you successfully obtain suitable financing. Another condition should be
that the property appraises for at least what you agreed to pay for it.
During the escrow period you are likely to require certain inspections, and
another contingency should be that it pass those inspections. Basically,
contingencies protect you in case you cannot perform or choose not to perform
on a promise to buy a home. If you cancel a contract without having built-in
conditions and contingencies, you could find yourself forfeiting your earnest
money deposit. Now
that you and the seller have agreed on the price and the length of time
(Escrow Period, which can run from a few weeks to six months) before you
move-in, you begin Escrow, which defined, is a deposit of funds, a deed
or other instrument by one party for the delivery to another party upon
completion of a particular condition or event. Whether
you are the buyer, seller, lender or borrower, you want the assurance that no
funds or property will change hands until ALL of the instructions in the
transaction have been followed. The escrow holder has the obligation to
safeguard the funds and/or documents while they are in the possession of the
escrow holder, and to disburse funds and/or convey title only when all
provisions of the escrow have been complied with. The
principals to the escrow : buyer, seller, lender, borrower : cause escrow
instructions, most usually in writing, to be created, signed and delivered to
the escrow officer. If a broker is involved, he will normally provide the
escrow officer with the information necessary for the preparation of your
escrow instructions and documents. The
escrow officer will process the escrow, in accordance with the escrow
instructions, and when all conditions required in the escrow can be met or
achieved, the escrow will be "closed." Each escrow, although
following a similar pattern, will be different in some respects, as it deals
with your property and the transaction at hand. The
duties of an escrow holder include; following the instructions given by the
principals and parties to the transaction in a timely manner; handling the
funds and/or documents in accordance with the instruction; paying all bills
as authorized; responding to authorized requests from the principals; closing
the escrow only when all terms funds in accordance with instructions and
provide an accounting for same : the Closing or Settlement Statement. The
selection of the escrow holder is normally done by agreement between the
principals. If a real estate broker is involved in the transaction, the
broker may recommend an escrow holder. However, it is the right of the
principals to use an escrow holder who is competent and who is experienced in
handling the type of escrow at hand. There are laws that prohibit the payment
of referral fees; this affords the consumer the best possible escrow services
without any compromise caused by a person receiving a referral fee. If
you are obtaining a loan, your escrow officer will be in touch with the
lender who will need copies of the escrow instructions, the preliminary title
report and any other documents escrow could supply. In the processing and the
closing of the escrow, the escrow holder is obligated to comply with the
lender's instructions. During the escrow process, your escrow officer, upon
request, can provide you with an estimate of the escrow fees and costs as
well as fees charged by others, provided such information is available. It has become a practice of some lenders to forward their loan documents to escrow for signing. You should be aware that these papers are lender's documents and cannot be explained or interpreted by the escrow (they are not lawyers, nor can they provide you with legal advice. If you require legal answers, you should first consult with a lawyer) officer. You have the option of requesting a representative from the lender's office to be present for explanation, or arrange to meet with your lender to sign the documents in their office. At the end of the Escrow period, the amount of closing costs
will depend on what items are customary for buyers and sellers to pay for in
your area. Traditions vary greatly from one area of the country to another.
The
escrow holder has no control over the costs of other services that are
obtained, such as the title insurance policy, the lender's charges,
insurance, *property taxes, recording charges, etc.. In some areas, for example, the buyer pays for title
insurance. In other areas, it is the responsibility of the seller. In still
other areas, the cost is split between buyer and seller. Your Agent can give
you specific information on the items that are customarily paid for by buyers
in your area. In addition, the amount of closing costs will depend on the
amount of points you will be paying with your mortgage loan, since these are
generally paid for up-front. (A point is 1% of your mortgage loan amount). Supplemental
Property Taxes is another concern of the buyer. Upon transfer of real
property, a supplemental tax bill is generated. This is accomplished in
cooperation with the County Assessor and the County Tax Collector. Shortly
after the close of an escrow involving the conveyance of real property, the
County Assessor will request information about the property from the buyer.
This information assists the Assessor in determining the value of the
property for taxation purposes. The escrow holder may have previously
supplied some of the information at the time of the closing of the escrow,
via Preliminary Change of Ownership form that should accompany each deed when
it is recorded). Sign on the dotted lines (lots and lots), wait the legal
waiting period in your state (usually 24 hours), congratulations, pick up the
keys, the home is yours. |
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Large Cap stocks are companies with extremely
large market capitalization, or "market cap", which is the product
of the number of shares outstanding and the price of the stock. |
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Quick Tip: Be Patient &
Prudent & seek wisdom |
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The
benefits of tax lien certificates are potentially rewarding in a way that is
rarely seen in real estate: fixed interest rate returns and a potential
chance to purchase property at a fraction of the normal cost. The Downside in purchasing tax lien certificates is to later discover the property they thought they had purchased at a value was really worth nothing. For one, if a homeowner declares bankruptcy while the tax lien is outstanding, the bankruptcy court could outweigh the rights of investors, leaving the tax lien certificate worthless in the wake of the IRS. Other problems could include a property that has significant damage, making the structure uninhabitable or the property so damaged (slide,flood,earthquate,etc.) thereby making the sale worthless. Prior to ever proceeding with the investment, the investor should perform physical inspections and surveys on property before making a decision. the loss to your investment portfolio could be much more significant than any potential gain. Due
diligence would be to confirm that the property has no other liens against
the title, as well as tell you whether or not the person whose name is on the
lien actually has legal rights to the property. When you do purchase TLC's,
keep in mind that you must make payment within 48 hours and in cash. |
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Did you ever notice those senior's enjoying
their Golden years? That is because they lived within their means and not on a
mass of burdening credit. Can you imagine jointly making 100K or more each
year and being broke? a huge portion of America is doing just that. Today's
modern family financial woes are because of many living a life of must
have it right now, forgetting the pending disaster of debt.
BIG MISTAKE. |
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Easy Credit is a path to bad credit and misery, and the house of cards is
most likely going to fall on you. |
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It
is exactly the opposite of buying a stock. If
an investor/speculator thinks the price of a stock will go down, they
essentially believe the current price of the stock is a good price at which
to sell. They would ask to borrow a certain number of shares from a bank to
sell immediately. Once the stock is sold, the borrower still has the
obligation to return the shares to the bank. That means the borrower will
have to eventually buy the stock back on the stock market at a later date –
also known as “buying to cover” or “covering a short position”. However, in
order to make a profit, the borrower wants to buy the stock at a lower price
than the price at which they originally sold the stock. The concept of
shorting stock remains to buy low and sell high, however, shorting a stock
requires you to perform these two steps in reverse order than when making
“long” investments. The
obvious incentive for a banks is to charge an interest fee on the value of
the sale proceeds generated on the stock they lend. Plus, they know that
they'll get the stock back in the future, a fact which limits their own
portfolio risk: Banks know that they will be better off lending than not,
because regardless of the direction of the stocks price movement, they will
have the same amount of stock, but will also have the added interest income
associated with lending the stock. Though
shorting is often used to mitigate risk associated with investing in the
stock market, it is important to realize the concept of “unlimited losses”
that are associated with short investments. When the investor makes a long
investment, the most they can lose is the total value of that investment (the
amount they paid for the stock) in total. In the case of shorting, if the
stock goes up instead of down, they face the possibility of having to make up
the loss. As an example, lets assume that shares in LCI are currently sell
for $10 per share. A short seller would borrow 100 shares of LCI, and then
immediately sell those shares for a total of $1000. If the price of LCI
shares later falls to $8 per share, the short seller would then buy 100 shares
back for $800, return the shares to their original owner, and make a $200
profit. This practice has the potential for an unlimited loss. For example,
if the shares of LCI that one borrowed and sold in fact went up to $25, the
short seller would have to buy back all the shares at $2500, losing $1500.
Its this potential risk of unlimited losses that requires an investor to be
very savvy (thorough knowledge of the proposed shorted stock) when shorting
in the stock market. Over
the long-term, the stock market enjoys a average gain of about 12% per year.
This does make shorting appear to be a poor direction to be going, as it
seems as though the general market is bound to move higher, or against the
wishes of a short-seller. However, in the short-term, the market does fall in
value (sometimes simply adjusting from un-ups), and on an individual basis
there will always be stocks that perform poorly. It is when observing these
select opportunities where short-selling can make sense as an investment
strategy. Shorting
can be used as an effective portfolio hedge, helping to eliminate some risk
associated with long term investments in the market. But due to the
possibility for unlimited losses, it should be thoroughly investigated, as it
has the potential of financial ruin for the investor. In a nut Shell: |
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REVERSE
MORTGAGE A
reverse mortgage is a special type of home loan that lets a homeowner convert
a portion of the equity in his or her home into cash. The equity built up
over years of home mortgage payments can be paid to you. But unlike a
traditional home equity loan or second mortgage, no repayment is required
until the borrower(s) no longer use the home as their principal residence.
HUD's reverse mortgage provides these benefits, and it is federally-insured
as well. To
be eligible for a HUD reverse mortgage, HUD's Federal Housing Administration
(FHA) requires that the borrower is a homeowner, 62 years of age or older;
own your home outright, or have a low mortgage balance that can be paid off
at the closing with proceeds from the reverse loan; and must live in the
home. You are further required to receive consumer information from
HUD-approved counseling sources prior to obtaining the loan. You can contact
the Housing Counseling Clearinghouse on 1-800-569-4287 to obtain the name and
telephone number of a HUD-approved counseling agency and a list of FHA
approved lenders within your area. Yes.
It doesn't matter if you didn't buy it with an FHA-insured mortgage. Your new
HUD reverse mortgage will be a new FHA-insured mortgage loan. Your
home must be a single family dwelling or a two-to-four unit property that you
own and occupy. Townhouses, detached homes, units in condominiums and some
manufactured homes are eligible. Condominiums must be FHA-approved. It is
possible for individual condominiums units to qualify under the Spot Loan
program. With
a traditional second mortgage, or a home equity line of credit, you must have
sufficient income versus debt ratio to qualify for the loan, and you are
required to make monthly mortgage payments. The reverse mortgage is different
in that it pays you, and is available regardless of your current income. The
amount you can borrow depends on your age, the 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. You don't make
payments, because the loan is not due as long as the house is your principal
residence. Like all homeowners, you still are required to pay your real
estate taxes and other conventional payments like utilities, but with an
FHA-insured HUD Reverse Mortgage, you cannot be foreclosed or forced to
vacate your house because you "missed your mortgage payment." No!
You do not need to repay the loan as long as you or one of the borrowers
continues to live in the house and keeps the taxes and insurance current. You
can never owe more than your home's value. When
you sell your home or no longer use it for your primary residence, you or
your estate will repay the cash you received from the reverse mortgage, plus
interest and other fees, to the lender. The remaining equity in your home, if
any, belongs to you or to your heirs. None of your other assets will be
affected by HUD's reverse mortgage loan. This debt will never be passed along
to the estate or heirs. The
amount you can borrow depends on your age, the 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. There
are five differenct way to receive your payments:
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THE DILIGENT PROSPER |
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Annuities only make sense
for a minor group of investors. Mutual funds are acceptable for the rest of
investors. The reason they are so much heralded, is that the commissions are
5% or more, that is why the sale of variable annuities have gone through the
roof since 2000. Should you wish to participate in
Annuities, it is wise to select one with low costs and good investment
options, from mutual fund companies. A variable annuity is
basically a tax deferred investment vehicle that comes with an insurance
contract, usually designed to protect you from a loss in capital. Thanks to
the insurance wrapper, earnings inside the annuity grow tax deferred, and the
account isn't subject to annual contribution limits like those on other tax
favored vehicles like IRAs and 401(k)s. Typically you can choose from a host
of mutual funds, which in the variable annuity world are known as "sub
accounts." Withdrawals made after age 59 1/2 are taxed as income.
Earlier withdrawals are subject to tax and a 10% penalty. Variable annuities can be immediate or deferred. With a
deferred annuity the account grows until you decide it's time to make
withdrawals. And when that time comes (which should be after age 59 1/2, or
you owe an early withdrawal penalty) you can either annuitize your payments
(which will provide regular payments over a set amount of time) or you can
withdraw money as you see fit. Residents of some states
may pay even more taxes on non-qualified variable annuity accounts. (That is,
accounts that are not purchased within an IRS approved retirement plan like a
401(k), 403(b) or IRA.) Some states also add a tax for variable annuities
purchased within a qualified account. <>Having to face the issue of income tax due on
annuities, there is no way of avoiding the fact that, if you
die with money remaining in your annuity, your beneficiary will inherit all
the taxes that you have deferred. Compare this to a mutual fund, whose basis
is stepped-up at death. In that case, your beneficiary would owe no taxes on
the gains.
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