7 Alternatives to a Reverse Mortgage

7 Alternatives to a Reverse Mortgage

Published: November 18, 2013

A reverse mortgage lets you cash in your home equity without selling your home. The catch? You’ll pay hefty fees. Maybe one of these alternatives would work better for you.

If you’re 62 or older, a reverse mortgage lets you keep your house and receive a lump sum or monthly payments that you don’t have to pay back until you move out or pass away.

Although that can be a blessing if you’re house-rich but cash-poor, the reverse mortgage’s biggest pro (you get cash) comes with cons. Closing costs are steep. And if you spend your home equity early in retirement, you might come up short later in life if you have high medical bills, have to pay for long-term care, or your living expenses outpace your investment income.

Before you commit to an expensive reverse mortgage, it pays to consider alternatives. Maybe one of these seven options will solve your problems.

Related: The Pros and Cons of Reverse Mortgages

1.  Rex Agreements

In a Rex agreement, you agree to sell the future increase or decrease in your home equity. The company buying your equity gives you a lump sum based on your home’s value, how much of your future equity you’re willing to sell, your financial history, and your home’s current condition. A typical Rex agreement would give you about 12.5% of your current home’s value.

With a Rex agreement you don’t have monthly payments or interest charges as you would with a reverse mortgage. When you sell your home, the Rex agreement company gets repaid by taking the agreed upon share of the increase or decrease in your home’s value.

Good option for: Paying off a one-time expense like an existing mortgage or a big medical bill.

Probably won’t work if: You have bad credit or a big mortgage. You’ll need a solid credit history and at least 25% equity in your home to qualify for a Rex agreement.

Cautions: Watch for low-ball appraisals, which can come back to haunt you when you sell and split the profits. Your Rex payment is tax-deferred, not tax free — you’ll need to pay Uncle Sam eventually so consult a tax adviser.

2.  Sell Your Home To Your Children

Planning to leave your home to your children? You could sell it to them now and have them pay you a monthly income or a lump sum. You could set it up like a Rex agreement, where you agree to pay your child a share of the profits when you sell your home in the future. Or, you could sell a portion of your home, say 49%, to your child for a lump sum or via a mortgage (if you want monthly income from your child).

A sale will have tax and estate planning ramifications; working with tax and legal advisers will be a must if this reverse mortgage alternative appeals to you.

Good option for: Parents whose children have high incomes.

Probably won’t work if: You don’t trust your children 100%, or don’t want to do business with family members.

Cautions: When selling your house to someone else, even a child, you may lose the right to live there. Put your agreement in writing and have a lawyer review it.

3.  Home Equity Line of Credit (HELOC)

A HELOC gives you money you can use for anything you want. With most HELOCs, you make interest-only payments the first 10 years, and you may even be able to write off the interest come tax time.

You don’t have to pay off your existing first mortgage to get a HELOC. Since the average life expectancy of a 65-year-old is 19 years, a HELOC might get you through half of the rest of your life.

Good option for: Seniors who want the security of knowing they can pay unexpected expenses in the future. Older homeowners whose life expectancy is 10 years or less.

Probably won’t work if: You have weak credit, can’t show enough income to cover the monthly payment, or you’re trying to get rid of all your monthly mortgage payments.

Caution: The lender can shut down your HELOC if your income or home value fall.

Related: The Risks of HELOCs

4.  Refinance Your Existing Mortgage

If you have an existing mortgage and the monthly payments are too high, consider refinancing or recasting to lower your payment. You’ll pay less each month, but more overall, if you refinance.

Thanks to the federal Home Affordable Refinance Program (HARP) you may be able to refinance even if you owe more than your home is currently worth. If you have plenty of assets, but little income, talk to a Fannie Mae lender. The secondary market giant has a program allowing borrowers who fail to meet income standards to refinance if they can show they have 12 months of payments in a bank or retirement account.

Good option for: Homeowners with relatively small outstanding mortgages and the ability to prove they have enough income or assets to repay their refinanced mortgage.

Probably won’t work if: You have no income and few assets.

5.  Rent Out Part of Your Home

Even though you love your home, if it becomes a financial burden, you may need to consider options other than borrowing. You could sell your house and downsize into something more affordable.

Want to stay where you are? How about renting a room in your house or having a child or other relative move in and share expenses? You pitch in with laundry or cooking. They pitch in with cash. The grandkids get to spend more time with you. Everyone wins.

Good option for: Homeowners with empty bedrooms and congenial attitudes.

Probably won’t work if: You’re particular about how people treat your things, or you don’t get along well with your family.

Caution: Have your new housemates purchase renters insurance. Even if they’re relatives, they might not be covered by your homeowners insurance. Do a credit and background check on unrelated potential housemates.

Related: More Ways to Make Money off Your Home

6.  Get a Job

You may not want to return to your career full time, but you can probably pick up extra cash by returning to work part time or seasonally. Use the money for current expenses or to pay off your existing mortgage.

Good option for: Healthy, mobile seniors.

Probably won’t work if: You can’t handle the stress of working.

Caution: Your Social Security benefits can be trimmed if you earn too much ($15,120 per year in 2013). Check to see how your retirement and health care benefits might be affected.

7.  Seek Public Assistance

You may qualify for public assistance and not realize it. The National Council on Aging’s BenefitsCheckUp will tell you if you’re a candidate for one of more than 2,000 federal, state, and private benefits programs.

Good option for: Everyone

Probably won’t work if: You don’t try it. Even wealthy seniors sometimes qualify for programs like property tax exemptions.

Seek Other Options to Pay Medical Bills

A good number of reverse mortgage borrowers take cash out of their homes to pay medical bills. If you’re one of them, consider these alternatives:

Try to find billing errors. Ask for an itemized bill, the pharmacy ledger, and your medical records from any healthcare provider sending you a large bill. Make sure each charge is for a medication, treatment, or service you actually got and that you were billed only once for each item.

Share your financial problems with your healthcare provider and ask for a payment plan you can afford, even if it’s only $10 a week.

If the bill comes from a healthcare facility, check to see if they’re required to provide free or reduced-price services under the Hill-Burton Act. If they’re still under Hill-Burton, you can apply for your costs to be covered.

Consult with an attorney to find solutions that keep creditors from seizing your home. Even if you owe a large amount, a state homestead exemption might prevent your creditors from foreclosing to get your home equity. An attorney will know if bankruptcy or a negotiated settlement are in your best interest.

Good option for: Low-income homeowners facing large medical bills.

Probably won’t work if: You have other assets you could tap to pay medical bills.

Caution: Don’t sign a “stipulated agreement” promising to make payments to a healthcare creditor without first consulting an attorney. Failing to make stipulated agreement payments could put your home at risk of foreclosure.

 

 

By: Barbara Eisner Bayer© Copyright 2015 NATIONAL ASSOCIATION OF REALTORS®

 

Want to Complain About Your Lousy Mortgage Closing?

Want to Complain About Your Lousy Mortgage Closing?

Published: January 15, 2014

A consumer watchdog wants homeowner feedback — by Feb. 7 — on hellish settlements to make the process better for all.

Think it took a long time to close your last purchase or refi mortgage? How about more than seven hours? That’s what happened to a couple of folks I know in Texas, and theirs is just one of many stories I’ve heard about things, ranging from interest rates that rise to mysterious appearance of random fees, that go way wrong at settlements.

I’ve heard many of these closing table stories from my husband, who used to be a loan officer, and my BFF, who’s a REALTOR®. Add to that a couple dozen closings where we bought or sold rental properties and you’ve probably got a reality TV show.

Do these stories sound familiar?

  • You were told you had to write a check for $20,000 because the loan officer “forgot” to mention that your loan was approved for only 80% of what you need to buy the house.
  • It took so long to get to closing that your interest rate lock expired. You had to pay a higher interest rate even though you promptly provided all the paperwork the lender asked for.
  • Fees show up on your settlement statement that weren’t on your loan estimate. You wanted to argue, but since you were getting a $50,000 check from your cash-out refinance, you closed anyway.
  • You found out at the settlement table about community covenants that restrict what you can do with your new property.

There’s no simple solution for these kinds of snafus. You can refuse to close the deal and walk away from settlement. Easy to do when you’re refinancing, but when you’re buying or selling a house, that could violate your sales contract.

CFPB Has a Plan to Fix Closing Problems

If you got shafted at the closing table, you have a unique chance to tell someone who can make sure that what happened to you doesn’t happen to other people. (It’s OK to share positive stories, too.)

The Consumer Financial Protection Bureau (CFPB) is collecting consumers’ closing table stories. “The stories and information you provide will be used to research and test solutions that address some of the biggest pain points associated with closing on a mortgage,” CFPB Policy Analyst Noerena Limon said in a CFPB blog post.

Get your comments in by Feb. 7, 2014.

Improvements Already in the Pipeline

Some of the work the CFPB has already done for consumers should eventually clean up some closing table issues. Starting in August 2015, you’ll get a new loan estimate when you apply for a mortgage and a comparative closing disclosure three days before closing.

That closing document is about a bazillion times easier to read than the current HUD-1 Settlement Sheet. And because both documents are very clear, you’ll be able to quickly tell when things like your interest rate or fees change between application and closing.

Related: How Your Money Management Practices Affect your Credit Score

Ways to Ensure a Smooth Closing

Until lenders start giving you the new disclosures:

Have your REALTOR® look over your settlement statement, even if you’re doing a refi. The title company can email or fax her your settlement sheet whenever you get it.

Call your title company ahead of the closing to see if everything is ready to go before you head over there. Be warned, though, your title company may tell you the paperwork is there even if it’s not, because they’d rather have you sit waiting for the closing package than wait for you to show up.

Bring the disclosures you got when you applied for the loan, so you know if any of the deal terms changed. If something seems wrong, ask about it and don’t sign if anything isn’t as promised.

 

 

By: Dona DeZube© Copyright 2015 NATIONAL ASSOCIATION OF REALTORS®

 

Getting the Most Out of Your Remodeling Dollars in 2014

Getting the Most Out of Your Remodeling Dollars in 2014

 

Published: December 20, 2013

As a serial remodeler, I’m looking forward to spending part of my winter holiday curled up on the sofa planning the wonderful things I’m going to do to my home in 2014. If you’re also day-dreaming about your next home improvements, these ideas (plus some eye candy) from the experts at realtor.com can help you balance the impulsive and emotional (I must have purple countertops!) with the long-term value-adds (Buyers don’t like my purple countertops!) of remodeling.

Plus, if you’re thinking of financing your project — with equity or a refi — we’ll help you plan with the a housing market forecast.

Future-Proof Kitchen

I’m nearing the end of what turned out to be a nearly two-year long kitchen remodel, but if you’re still in the contemplation stage, consider some of 2014’s top kitchen remodeling trends care of property listing site realtor.com:

  • Modern design with white or gray cabinetry
  • Simple countertops
  • Minimalist designs
  • Appliances that blend into the cabinetry
  • Hammered, matte brass hardware

Several of these kitchen “trends” — particularly white, minimalism, and simplicity — are actually not trendy, but enduring. You’ll find most of them on HouseLogic’s definitive list of timeless kitchen features. They’re the features you’ll love now and in 10 years — and that will be marketable when it’s time to sell.

Flex Rooms   

The hordes of relatives visiting your house this year say they’re staying just a little while, but chances are, one of them will want to move in with you at some point. Embrace the multigenerational trend, says realtor.com, by creating flex rooms.

Adding or converting a bedroom to include a sitting area and bathroom makes a lovely sanctuary for your guests now and a cozy space for your mother in her later years. Consider a separate entrance, too.  When you get up there in age yourself, you can supplement your retirement income by renting out the space.

Related: Multigenerational Remodeling Strategies

Paint Color

The official color of 2014 (according to the official arbiter of color, Pantone) is radiant orchid — a souped-up lilac. Purple accent pillows for the sofa? Definitely yes. But radiant orchid as a dominant color in your house? Not so much.

“Be wary of any trend that has the potential for a short shelf life,” realtor.com advises. Stick to neutral colors for anything in your home (inside and outside) that’s not as easy to replace as a pillow.

Home Equity Rising

OK, now for the brass tacks part of remodeling: paying for it. A few real estate predictions for 2014 might help your sort out your options.

Experts predict home prices should rise in 2014, which means you could have the home equity you need to fund your next renovation. Areas where foreclosures are falling and buyer demand outstrips the number of homes on the market have the best chance of seeing rising prices.

Related: When to Use Home Equity and When Not To

Interest Rates Headed Up

You may have more home equity in 2014 than you did in 2013, but doing a cash-out refinance to pay for your remodel will be harder and more expensive to do in the year ahead due to rigid underwriting rules and rising interest rates. Lenders say loan files are now routinely hundreds of pages long, so lower your expectations about how fast and how easy it is to refinance. Don’t let your frustration with the process wreck your enthusiasm for your remodeling dream.

Related: Turned Down for Refinance? Don’t Take No for an Answer

And Now for that Eye Candy

Whenever you’re remodeling, it’s smart to make sure you don’t over- or under-improve compared with neighbors’ homes. So check out some of the home listings on realtor.com in your Zip code, many of which include interior pictures.

Once you’ve spied on the Joneses, check out these hilarious pictures of the wildest home features of 2013.

I won’t even guess what installing a rowboat bathtub or cathedral-themed wine room would do to your home’s resale value, but looking at them could sure amuse you on a long winter’s night.

 

 

 

By: Dona DeZube© Copyright 2015 NATIONAL ASSOCIATION OF REALTORS®

 

Do Organic Home Remedies for Lawn Care Work?

Do Organic Home Remedies for Lawn Care Work?

Think you’re smart and thrifty feeding flat beer to your lawn? Think again. Home remedies for lawn care may cost you more than you think.

We might love the idea of maintaining our lawns with non-toxic pantry products — soda, vinegar, and dish detergent — that help keep pesticides and other chemicals out of the environment while saving us a little money.

But do these home remedies really work as organic alternatives to traditional pesticides? And if so, do they really save money?

Not so much, say turf professors and pros.

“I wouldn’t waste my time,” says John Boyd, a University of Arkansas professor of weed science. “You can kill a weed with vinegar — in the better neighborhoods they use balsamic. But it’s not all that effective or cost-efficient.”

Also, home remedies — especially bug-killing concoctions — don’t have the same precision and accountability of store-bought lawn care products.

“They’re not labeled as pesticides, and have not been through any review or screening process,” says Dan Gilrein, an entomologist with the Cornell Cooperative Extension of Suffolk County in New York. “Materials may not be as benign as assumed — particularly when not used as intended.”

So are organic home remedies for lawn care a waste of time and money? Some are; some aren’t. Below, we break it down for you.

Boiling Water

Reputation: Weed killer

Reality: Undoubtedly, dumping boiling water on a weed will scald and kill some shallow-rooted, annual weeds, like chickweed. But it won’t wipe out the deep roots of perennial weeds, like dandelions, unless you repeat for days.

What’s more, the boiling water treatment is non-selective; not only can you scald yourself, but you can also kill grass and prized plants around the weed, says Craig Jenkins-Sutton of Topiarious Urban Gardens in Chicago.

Cost: How much is your time worth? By the time you boil the water, run it out to the garden before it cools, and carefully dump it on unwanted weeds, you could have grabbed a good weeder and dug up a garden full of dandelions — and those won’t come back.

Vinegar

Reputation: Weed killer

Reality: Acetic acid is a good general herbicide that sucks water from common weeds. But most pantry vinegar has only a 5% acetic acid concentration — too weak to kill all but the most tender, annual weeds. Perennial weeds — fuggedaboutit!

If you want to kill weeds with vinegar, you’ll need a commercial solution that’s 20% acetic acid. It’ll suck weeds dry, but will also dry out your prized plants, so be careful when spraying.

Cost: Distilled white vinegar: $2.40/gal.; commercial vinegar: $33/gal. (Note: Diluting it 1:1 with water will give you twice the amount of vinegar at a high concentration.)

Dish Detergent

Reputation: Insecticide

Reality:
The Iowa State University Extension says it’s OK to use dish detergent, like Ivory or Palmolive, to kill soft-body insects, such as aphids, scales, and whiteflies. The soap destroys the waxy shell that protects the bugs, causing them to desiccate (dry up).

In a spray bottle, combine 1 tablespoon of dish detergent with 1 quart of water. Then thoroughly saturate the infected plants to completely wet the insects you want to kill.

One problem with dish soap, however, is that it can kill plants along with the insects. That’s where commercial insecticidal soaps have the advantage. Their formulas usually have a stabilizing agent that helps prevent the soap from damaging plants. Of course, you pay more for that formula.

Cost: Palmolive dish washing liquid: $3.30/10 oz.; Safer Brand Insect Killing Soap spray: $6.40/24 oz.

Soda and Beer

Reputation:
Fertilizer that greens-up lawns

Reality:
Home remedy guides say beer and soda contain carbohydrates and phosphorous, which feed lawns. Turf scientists, however, say that grass makes its own carbs from photosynthesis, and that soil generally has all the phosphorous a healthy lawn needs. Actually, phosphorous runoff is a watershed pollutant, and some municipalities are banning commercial fertilizers that contain phosphorous.

Spraying flat cola or beer on your lawn essentially just waters the grass, which can help it turn green.

Cost: Six 16-oz. cans of Bud: $7.80 (enough for a 10-by-20-ft. lawn)

So What’s a Greenish Lawn-Owner to Do?

First, know this: Lawns suck up more water than any other irrigated crop in the U.S. — so their very existence, arguably, is eco-unfriendly. If you’re dedicated to protecting life on Earth, replace your lawn with indigenous, drought-resistant plants or artificial turf.

Still, you might think life on Earth isn’t worth living unless you can wiggle your toes through cool fescue that’s not covered with toxic chemicals. If so, here’s some advice:

  • You’ll have to devote yourself to precisely mowing (with a push mower, if you want to be green), watering (deeply and less often), and fertilizing (with nutrient-rich compost). Diligent lawn care will keep out weeds naturally and promote beneficial insects that will eat the ones you don’t want.
  • Forget the idea of lawn perfection. Without chemicals, a few weeds will grow and some patches will turn yellow.
  • Spend a few extra bucks and buy organic lawn products that take the guesswork out of applying non-toxic solutions.

Related: Was Your Lawn Damaged by Severe Winter Weather? Here’s How to Fix It.

 

 

By: Lisa Kaplan Gordon© Copyright 2015 NATIONAL ASSOCIATION OF REALTORS®

 

Did You Know Dirty Light Bulbs Waste Energy?

Did You Know Dirty Light Bulbs Waste Energy?

 

Dirty light fixtures not only look bad, they reduce brightness and waste energy. Here’s how to clean your fixtures and brighten the room to boot.

Granted, cleaning light fixtures is a hassle that requires a stepladder and a steady hand. But it’s a necessary spring-cleaning chore that freshens your home and gives you the light you’re paying for.

Dirty bulbs shed 30% less light than clean ones, says the U.S. Department of Energy. Add a dusty, dead-bug riddled cover, and you’ve got an automatic dimmer, whether you want one or not.

Got a dirty light fixture? We’ve got your cleaning tips.

Chandeliers

Yes, you should dust your crystal chandeliers weekly, especially during pollen season. But once or twice a year, you should make those crystals sparkle with a thorough wash.

1.  If the chandelier isn’t too big, take it down and lay it on top of a towel spread on a table. If it’s huge, hire a handyman to bring it down, or grab a stepladder and clean it while it hangs.

2.  Take a picture of the chandelier before you start cleaning. That way you’ll remember where each crystal belongs if you take them off during cleaning, says Meg Roberts, president of Molly Maid cleaning service.

3.  Mix a solution of 1 ounce mild dish soap with ¼ cup white vinegar and 3 cups water.

4.  Add to a spray bottle.

5.  Spritz each crystal.

6.  Let dry and polish with a microfiber cloth.

Related: A Healthy Shine: Green Cleaning Products for Your Kitchen
Light Bulbs

These days, bulbs have long lives thanks to new LED and CFL technology. They’re bound to get dirty and should be cleaned.

Mary Beth Gotti, manager of the GE Lighting Institute, says a thorough wipe with a dry cloth is the best way to get rid of dust and dirt.

“If you use a damp cloth, you can get water into crevices in the lamp that can damage electronics,” Gotti says.  Also, don’t spray cleaning solutions directly onto the light bulb, which could damage the bulb.

Most important: Turn off the electricity to the fixture before messing with the bulbs. To be extra cautious, turn off the circuit breaker, or put a piece of tape over the switch so no one else turns it on while your working.

Ceiling Fixtures

Ceiling fixtures can be a dusty, grimy, buggy mess. Carefully take down the fixture cover and slide it into a sink full of soapy water. Dry and shine with a microfiber cloth.

Avoid the temptation to put glass fixtures into the dishwasher. The glass can shatter, ruining your fixture and your dishwasher.

Pendant Lights

These usually are easier to reach than ceiling fixtures, so you can clean in place.

Turn off the light, let bulbs cool, then spray and wipe the outside of globes with a microfiber cloth and cleaning spray.

Wipe bulbs and extension rods and cables with a dry cloth.

Recessed Lights

Dust weekly with a long-handle duster, such as a Swiffer, that traps dust and cobwebs.  For a more thorough cleaning, wipe the insides of canisters and the bulbs with a microfiber cloth or a slightly damp rag.

Caution: Before cleaning, make sure the electricity is off and the bulb is cool.

Ceiling Fans

Dust the lights on ceiling fans weekly when you clean the fan blades. When a bulb goes out and you have to climb a ladder anyway, clean globes and bulbs with a microfiber cloth. If the globes are really dirty, take them down and clean with soapy water or a cleaning solution.

When removing or returning globes or bulbs, be sure not to steady yourself by grabbing fan blades, which will turn if touched.

Tricks of the Trade

1.  Dryer sheets are low-cost alternatives to microfiber clothes. They’re great for dusting bulbs.

2.  Wear goggles when dusting or spritzing overhead fixtures to prevent dust or cleaning solution from hurting your eyes.

3.  If you’re having trouble removing the bulb in a recessed light, cut a 12-inch strip of duct tape, and fold it over the bulb so that the ends act like handles that are easier to grip than the glass.

 

 

 

By: Lisa Kaplan Gordon© Copyright 2015 NATIONAL ASSOCIATION OF REALTORS®

 

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