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Wednesday, January 21, 2009

Reverse Mortgage Costs Still High ... AARP

By Jerry Smith

In July George Bush signed the big housing bill with provisions to for two important reverse mortgage changes.

Most mortgage professionals were clamoring for the first big change and that was to increase lending limits up to 417k. The other change, lenders wish was not included, was the reduction of origination fees.

This is what the government madates under the new law. Maximum origination fees up to $200,000 of 2%. From $200,000 to $417,000 an additional max of 1%.

For example, on a $400,000 home we have $4,000 for the first 200k in value and an additional $2,000 for the remaining 200k in value. So, the total fee is $6,000.

Before the law was changed the lender could charge 2% regardless of value, up to the FHA limit.

What concerns me is why the lender is getting the proverbial finger pointed at it. I mean how low can the origination fee be before the lender goes bellie up.

This "high cost" origination fee is the only way reverse mortgage companies create revenue. To reduce it is asking them to find a new business.

Additionally, these fees are not more than typical forward mortgages. They appear to be more to the layman.

How a forward mortgage ends up costing the borrower as much as a reverse mortgage is in the "service release premium". This is is a fee the bank pays the mortgage company inside the rate. They may charge 1% but there is backend money in those loans.

Reverse mortgage companies make a small percentage of their revenue from the SRP... Many times it's less than $100. That's why the origination is higher.

As a mortgage professional I'm somewhat bewildered at AARP's views toward this subject. I wonder if they are even genuine.

There may be some hypocracy going on. I wonder if they gouge their insurance company's in same manner they wish to gouge reverse mortgage companies.

Oh, don't think so. Insurance commission is the number one money maker for AARP. It's a money train.

AARP is not so pure and they should to sit this one out.

Consolidate Your 401k's Into An IRA

By Frank Dodd

Most people wind up switching companies several times in the course of their lives. Hardly ever does a person stay with 1 employer their entire working life. Many companies offer a 401k plan as part of their benefits package. This leaves many people with multiple 401k funds in their name in their career course.

What should you do with your 401k fund after switching companies? You might look into a 401k rollover to IRA.

There are many benefits that you get from rolling over your 401k into an IRA. Now we'll go over a few of them.

To begin, if a person changes companies 3 times, they will own 4 401k policies (3 from the previous employers and 1 from the new one). Having multiple accounts can be difficult to manage. You would have to follow paper on all 4 accounts instead of just 1. And most people will get discouraged by the excess paperwork and stop taking the needed interest in their portfolio. This can create huge problems down the road.

Putting your previous 401k accounts into an IRA will consolidate your retirement plans and make life a lot easier. You will reduce paper and be able to pay better attention where it counts. Changing jobs 3 times would not matter. You could roll as many 401k's as you'd like into the one IRA. And the person above would only have 2 accounts instead of 4 (1 IRA and 1 401K with the current employer.

Also, Leaving your retirement plans in the hands of your previous employers is a bit risky. If the company goes bankrupt you lose everything. Transferring and consolidating those accounts all into 1 IRA with a separate financial institution is much less risky.

And the ultimate benefit is that you leave yourself in control of your own future instead of having others do it for you.

The 401K offers to match your investment 100%, and you don't see an offer like that from most investment opportunities. So take advantage of it and contribute the maximum that the employer will match. Then put the extra funds into your IRA.

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10 Questions to Ask Before You Remortgage

By Chad Copp

If you are thinking about remortgaging your house, you are probably wondering whether or not it's the right move for you. A lot of times, remortgaging is not necessary, and other times it's totally necessary if you want to save your house and not go broke in these tough financial times. After answering these ten questions, you are going to know whether or not remortgaging is right for you.

1. What's my credit score? By knowing your credit score, you are going to be able to estimate what type of interest rate you are going to be able to get on your remortgage. If your credit is not the best it could be, you may want to work on repairing it before you remortgage.

2. What is your current rate of interest on your mortgage? If you're only going to save a half a percent or even a percent, you might want to consider holding off on remortgaging. You want to make it worth your while, and you also want to make sure you get the best deal possible. By holding off a bit you can see if mortgage rates go down even further.

3. What's the current rate of interest that banks are offering? There's a current rate of interest that's pretty much standard with all remortgage companies, so you are going to want to find out what that is and figure out how much money a remortgage could save you every month in your bills.

4. How much is it going to cost you? Every bank or mortgage company is going to have a different set of fees to remortgage, and you are going to want to go with a company whose fees aren't going to be too much. These fees are sometimes hidden in the mortgage papers, so be sure to read them thoroughly before signing.

5. How many years are left on your current mortgage? If there are only a handful of years left on your current mortgage, you might just want to pay it off as soon as possible. Ask yourself what is better: paying off your home quickly or paying it off with a lower interest rate. By remortgaging, you won't be able to pay your house off quicker, just with less interest.

6. Do you plan on moving anytime in the future? If you plan on moving in the next one or two years, it probably won't be worth the time and effort to remortgage. Just ride it out and get a better mortgage when you get a new house.

7. Do you love your wife? If the answer is "no" and divorce is in the cards, you might want to wait to remortgage. Remortgaging is difficult to do and is going to be expensive too, so you don't want to do it more often than necessary. Remortgaging should be done only if you have to.

8. Have you been thinking about remortgaging for very long? A lot of people see commercials on television and think, "Oh remortgaging is for me," not realizing how much work it actually is.

9. Is your schedule clear? Remortgaging is a headache and is going to eat away at your free time. If your schedule isn't clear, choose a different time to remortgage.

10. Have you talked to any banks? There isn't any harm in going and talking to some banks to see whether or not they think that you are a good candidate for remortgaging. If you decide that it isn't for you, there is no obligation to go on in the process.

Remortgaging your house is not a simple thing, and knowing when you should and shouldn't do it is going to be tricky. These ten questions can help you decide whether or not you need to remortgage.

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Places You Can Go Looking For A Cheap Loan UK

By Rashel Dan

Regardless of how great your pay may be, there will always be some instances wherein you need to get a cheap loan UK for immediate cash needs. In such cases, you will have to consider cash advance, payday loan, or just any kind of personal loan.

The catch about these short term loans is that they can often result in loan payments with added high interest rates. But there are places where one can make a person loan and not suffer the consequences of paying too much back to a loan institution.

Places To Get Fair Loans

To get a cheap loan UK, one can go to the traditional outlets such as banks. This is especially great in the sense that banks are always accessible and you probably won't have trouble making a loan. The drawback is that a bank (if popular) will charge a little more interest than if you go online.

Now, there are online lenders and online banks that have lower rates because of their low overheads. Online banks are probably the best places where you can get the lowest loan rates. You also don't necessarily have to be in the UK to manage your loan.

These online lenders and bank are accessible and convenient to get in touch with if you have any problems with a particular personal loan. Surprisingly, you might also find that supermarkets, shops and post offices are offering financial loans, but there are not many who are keen on the idea just yet.

The only other place to look for a cheap loan UK is through borrowing and lending exchanges. Now, these exchanges work in much the same way that a co-operative works. This means that they can offer people low-cost personal loans. It comes out low-cost because they cut out most of the people in the middle who try to gain commissions from representing lenders. It's these extra costs that can add to the interest of a loan as one is paying it back.

With exchanges, people can lend and borrow from each other directly. This can be done by two parties entering into a legal contract with each other. What the exchange does is it manages the collection of the payments and if there are payments that are not made on time or not made at all, then a recovery process similar to a banks can be implemented.

Risks is low because amounts that are loaned or borrowed are spread between 50 borrowers and lenders at the very least; thus, lower payments are required.

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