Guest Post by Patrick Chism The expenses associated with homeownership are no joke! There are mortgage payments, home insurance costs, and ongoing maintenance fees. On top of it all, you have to keep the lights on. It’s no wonder homeowners are constantly looking for ways to lower their next utility bill. Fortunately, there are plenty of effective ways to save money on your bills that can easily be worth looking into — options like a no-closing-cost refinance or home equity loan to pay down other debt and free up some extra cash to put toward your utilities. Finding other ways of refinancing your home is always on the table and can be a practical, beneficial decision over time to uncomplicate your monthly budget. Make sure costly utilities are a thing of the past and take your personal finance skills to the next level with these helpful tips to cut your average monthly homeownership bill. 1. Seal your attic Heading into the winter season, take the time to ensure your home is properly insulated. This is a surefire way to save on heating costs. While this project can be a challenging DIY endeavor or result in a hefty bill from a contractor, paying a bit up front will save you some substantial dough in the long run. To start, you should assess your home based on its specific needs. Pay attention to common symptoms of poor insulation: a draft running through the house, uneven temperature between rooms, high heating and cooling bills, or a large concentration of dust throughout the house. You may want to hire an efficiency expert to perform an energy audit of your home and pinpoint any problem areas. Among other things, they will assess your insulation levels and inspect your home for air leaks so you can learn exactly where you are losing money and how you can fix it moving forward. Making small renovations that improve your home’s energy efficiency may also increase its current market value so when it comes time to sell, you reap the benefits in the form of a higher listing price. 2. Unplug electronics Did you know that your electronics continue to use energy even when they’re not in use? Known as “energy vampires,” those gadgets you keep plugged in will suck any money you’re trying to save out of your pocket and into your next utility bill. Walk through your home and check your outlets. Decide which electronics should be unplugged and which should stay constantly operating. Small appliances, charging stations and entertainment systems are all fairly easy to reboot after use — it’s as easy as putting the plug back in the outlet. Other electronics, like air conditioning units or your Wi-Fi equipment, actually use more energy while starting up again, so it’s best to leave them running at all times. While keeping electronics you don’t commonly use plugged in is an obvious waste of energy, it can also be a safety hazard. One way to prevent fires or other malfunctions in your home is by upgrading your electronics to smart functioning. You can purchase smart power strips, outlets, or light bulbs that are both energy efficient and can be operated using an app on your phone. This way, energy is better conserved, and you’ll never have to worry about accidentally leaving the lights on while you’re away from home. 3. Downsize Downsizing your home may not be the simplest option on this list, but it’s certainly one of the most impactful ways you can save on your utility bills. A smaller home means smaller rooms to light and less space to heat in colder temperatures. This will have a substantial impact on the cost of utilities. Your mortgage will also likely decrease if you move to a home with smaller square footage. Before downsizing though, it’s important to consider things that may cause your home costs to increase, like property taxes or insurance fees, and weigh those potential gains and losses against one another. If you’re not ready to move out of your home, you should also consider refinancing your mortgage while rates are low. Restructuring your mortgage to meet new terms and conditions can greatly reduce the cost of your home from month to month. The bottom line Reducing the costs of homeownership can come in many forms. But, if you’re cutting costs on utility bills, there are a couple key tips to remember: Sealing your attic and spreading proper insulation will help your home stay heated during winter, allowing you to use less energy to keep your rooms and yourself warm. When you’re away from home, you should unplug any electronics that you don’t frequently use to save your utility bill from “energy vampires” or your home from dangerous safety hazards. At the end of the day, it may make the most sense for you to downsize or restructure your mortgage so you can prevent more expenditures from leaving your bank account. Talk with a mortgage professional to see what options are available to you so you can lower your monthly payments each month. For seven more great ways to save, visit the Best Company Mortgage Rates Blog for helpful information on the ownership, financing, and servicing of your home. Patrick Chism is a Section Editor at Quicken Loans. Patrick’s expertise focuses on making the most out of homeownership and maximizing the return on investments while keeping a close eye on your wallet. Find more of his tips on owning and financing a home at the Rocket Mortgage Learning Center.
Retirement can be a time of fulfillment and enjoyment, but it can also be a time of financial stress. Luckily, seniors have many different options to make their retirement years full of positive memories and experiences. One of these options is a reverse mortgage. While a reverse mortgage is not right for everyone, it can be a useful alternative for some. There are many reverse mortgage companies to choose from, and it is vital that consumers be informed before making a decision. How does a reverse mortgage work? A reverse mortgage is a financial agreement between a reverse mortgage lender and a homeowner where the homeowner trades some of their home equity in exchange for receiving regular monetary payments. In order to take out a reverse mortgage, you must be at least 62 years old and own your home or have considerable equity in your home. At least one borrower must be living in the home and ensuring that the required property fees are being paid. Many seniors use reverse mortgages to get rid of their mortgage payments, pay off debt, and supplement their income during retirement. What are the pros of a reverse mortgage? There are no monthly payments due to the reverse mortgage company. Instead, the loan is due in full when the borrower permanently moves from their home, sells their home, or passes away. This means you can continue to live in your home as long as you wish while still receiving reverse mortgage loans. Some seniors still prefer to repay the loan in part or full to keep their balance low. If this is the route you choose to go, you will not receive any pre-payment penalties. Either way, you can have the peace of mind of knowing that while you are living in the home, you can not default on the loan. All reverse mortgages are capped at the value of your home. The reverse mortgage you receive cannot exceed the value of your home, which means you or your estate will never owe more than the value of the home. If the loan you receive ends up being larger than the value of your home when the loan is repaid, you and your estate will not be liable to pay the difference. You will be freed from your monthly mortgage payments. You will be able to continue to live in your home with the bonus of not having to repay the loan. Be aware, however, that the reverse mortgage lenders do not cover other home-related fees such as property taxes, insurance, homeowner's insurance, and maintenance. Dr. Guy Baker, founder of Wealth Teams Alliance and a wealth consultant with over fifty years of experience, says that for many of his clients a reverse mortgage has been beneficial. "A reverse mortgage, for my clients, provided needed financial relief when they had no other alternatives. With a reverse mortgage, they could pay for medical bills and other expenses that they could not have afforded otherwise." The loans that you receive are generally not considered taxable income. All the loan proceeds from a reverse mortgage are not taxed. Many retirement investments are taxed when you withdraw funds from them, so having a source of money that is non-taxable gives you the freedom to use the funds as you wish. If your home increases in value, you have the option to refinance your loan in order to receive further funds. If your home increases in value and you would be able to get a higher loan from your home’s equity, you can apply for a further loan and receive further funds. After the remaining loan is repaid, any remaining equity will belong to you or your heirs. A common misconception is that you are giving your home over to the government; however, this is not true. For example, when the borrower passes away, the home will be sold and the reverse mortgage will be paid back to the reverse mortgage company from the sale of the home. The remaining money from the sale will be given to the borrower’s estate. On this topic, Rob Powell, CEO of Rob Powell Biz Blog states that, “With a normal mortgage, your equity increases as you pay off the loan, but with a reverse mortgage, your equity in the home steadily decreases.” Government regulations allow you to make informed decisions and protect you from default. An HECM reverse mortgage is government-insured and has the highest standard of consumer safety in mind. All applicants must receive counseling sessions with counselors who are knowledgeable about other financial options and will provide unbiased information about the pros and cons of a reverse mortgage. They also go into detail about the loan process and what your specific responsibilities will be as a borrower. There are other regulations such as limitation of an origination fee and a personal financial assessment to see if you will be able to pay the other fees required to maintain your home. What are the cons of a reverse mortgage? If you vacate the home for more than a year, the loan will be due. This could be due to unforeseen health problems that require you to move into a nursing home, for example. When you suddenly vacate the property, you will only have six months to pay off the loan. Your children’s inheritance will be smaller if you are planning on leaving your home to them. Dr. Guy Baker weighs in by saying, “Family members have to be onboard when a reverse mortgage is taken out on the family home. The kids need to see the reverse mortgages as a way they can avoid having to pay their parent’s living expenses, rather than as a loss of inheritance.” In a reverse mortgage, you are using equity that you already have in your home to receive a loan. When you pass away or move, the reverse mortgage company will get the proceeds from the home in the amount that you owe them, and your children will receive whatever is left over. The upfront fees are high compared to other kinds of loans. There are many upfront costs that come with a reverse mortgage. Among other fees, these can include an origination fee, real estate closing fees, and an initial mortgage insurance premium. The flexibility of not having to constantly repay the loan can hurt you in the end by having large fees included in the loan. Ongoing costs can be high because you are charged interest and fees for the current month’s loan as well as the interest and fees that were added to the other month’s loans. Some of the ongoing costs included in a reverse mortgage are interest, servicing fees, annual mortgage insurance premium, property charges, etc. Is a reverse mortgage right for me? There are many factors that play into whether or not a reverse mortgage will be right for you. Micahel Drake, owner of PMG Loans asserts that,“Reverse mortgages can be a good idea in situations where someone owns a property with significant equity and is looking for a steady stream of income.” A reverse mortgage can be a quality opportunity to be able to enjoy your years of retirement by turning an asset you have into cash. To some, turning your home equity into cash may be seen as limiting to your heirs because they will not inherit as much from the family home. While this is important to consider, it is also valuable to look at it in a different light. If you are struggling to make ends meet, taking out a reverse mortgage can grant you more financial independence and lighten your children’s financial burden of helping with your financial constraints. For a reverse mortgage to make sense for you, you must be in a position where you can continue to pay all the fees that come along with owning a home besides your monthly mortgage, which will be covered by the reverse mortgage company, even if you use part of the reverse mortgage loan to pay off these fees. If you are not going to be in a position to do this, even after you receive the loan, a reverse mortgage may not be a good fit for you. It may be right for you if are going to be receiving enough money from the reverse mortgage company to solve your current financial problems. This requires reaching out to companies and doing a little digging to see where you qualify. Click here for a list of verified reverse mortgage company reviews. It may be right for you if you are not planning to move anytime soon. This is important to consider because if you move soon after you take out the reverse mortgage, you will not be able to take full advantage of the loan and, in this case, the upfront fees will likely not be worth it. Overall, getting a reverse mortgage is a personal decision that requires thought, research, and consideration of the pros and cons. Look at all the aspects of your particular situation in order to determine if a reverse mortgage is the right decision for you.
Many people cannot refinance their house if needed. If you are among them, you understand the scary truth: if you fall on hard times, refinancing your home is not an option. You could be kicked out of your home, forced to move, and still be up to your neck in debt. Founded in October 2016, EasyKnock created the program Sell and Stay to help prevent this. Sell and Stay was created to give those who can’t refinance their home a chance to sell their home to EasyKnock, become the immediate renters, and not have to move. BestCompany.com was created to help educate consumers and compare companies so you can feel confident choosing the best company for your specific needs. To help you understand this option of releasing your home equity, we’ve taken a closer look at this product and company. A quick glance at Sell and Stay So what is Sell and Stay? “Sell and Stay is a product from EasyKnock which has seen massive adoption among customers looking to release equity by becoming renters of their own home. It enables people with less than optimal credit or small business owners with complicated W2s to access equity by renting their home with the ability to buy back whenever they want. A significant portion of our client base is taking advantage of EasyKnock's Sell and Stay to reinvest into their property, business, or to pick up another.” — Jarred Kessler, Co-founder of EasyKnock In order for you to know whether Sell and Stay is the right product for you, we’ll take you through EasyKnock’s unique service by pointing out the upside, the downside, the bottom line, and everything else you may need to know about EasyKnock and its product. The upside to Sell and Stay Perhaps EasyKnock’s most impressive quality is its originator, Jarred Kessler. After many years in the business world with Credit Suisse, Morgan Stanley, and serving as Vice President of Goldman Sachs, Kessler has transitioned to become the co-founder and CEO of EasyKnock. EasyKnock’s product Sell and Stay is starting to change the home equity market. Positive features of EasyKnock’s Sell and Stay approach include the following: You are more likely to qualify You do not have to move You can access this asset quickly and easily You can buy back your home whenever You are more likely to qualify EasyKnock's Sell and Stay, has a qualifying criteria that is much less rigid than most banks, allowing more people to access their equity. In an age where it feels like you need a good credit score to buy groceries, credit checks do not affect the probability of qualifying. Sell and Stay currently works best for individuals with homes valued at $150,000 and above, and have at least 50 percent in equity. You will not have to move You can probably remember why you bought your home in the first place, and you could probably still make a whole list. Maybe your kids were closer to school, you were near family, closer to work, better neighborhood, the list keeps going. It is no small task to make a house a home. You’ve created memories and created an atmosphere that is yours. The fact that you can get what you need without moving is a huge benefit of this program. You will never have to put a for sale sign in the front yard and your Sell and Stay transaction will remain confidential, so people won't even know that you now rent. And hopefully, you won’t have to rent long and can buy your house back quickly. You can access this asset quickly and easily If you've paid off the majority of your mortgage, there could be tens of thousands of dollars sitting in your home that you could be using. Sell and Stay is one of only a few ways in which you can release the home equity in your home. With the average American household carrying more than $130,000 in debt, people need money now. This is one of the fastest ways you can access the equity in your largest asset. Because EasyKnock is not a lending company, it can close a deal in 21 days, meaning you can have that much-needed money now. You can buy back your home whenever EasyKnock wants you to buy your home back in the future. Their goal is to make that possible. The repurchase price is established upfront and will be explained to you at the beginning of the process. The downside to Sell and Stay Though EasyKnock has a good product and solid company management, there are still some downsides that everyone should consider to ensure that this option is right for them. Ask yourself the following questions: Do you trust yourself? What are the costs? How experienced is the company? Do you trust yourself? In a time when the majority of people are in debt, are you going to be able to afford to pay the monthly rent, or are you just going to waste the money EasyKnock gives you? Just because you do not lose your house right away, that doesn’t mean that you are in the clear forever. If you fall behind on rent payments, you will be treated just like anyone who pays rent. You’ll be out on the curb, now without any assets. You know yourself better than anyone. If you do not feel like you will be smart with the money you receive from EasyKnock, then this option is not for you. It may be a better option to sell your house and move into a smaller home. What are the costs? EasyKnock makes a profit through fees. The required fees come both now and later. These fees are your cost for tapping into your equity early. Immediate fees: EasyKnock fee — The EasyKnock Fee is 2 percent. Closing costs — The company charges 1.5 percent of the appraised value to cover closing costs. This is to pay for title insurance, an appraisal fee, some processing fees, a survey fee, and legal fees. Future fees: Rent — Rent is decided by comparing similar houses in your area. The rent cost can be flexible, according to how much money you are wanting to take out. Repurchase — If you repurchase your home within the first year, you may buy it back for what EasyKnock funded you, plus 5 percent. The price increases annually by 2.5 percent of the funding amount. Sell and move — If you decide to move, you will receive the remainder of your equity (the Sellout Value). How experienced is the company? This is a new approach to accessing home equity. There will be growing pains as this company creates a new path. The silver lining is the experience Jarred Kessler has. He brings his years of experience in the business world to this endeavor, giving the company an advantage compared to most startups. Although this company has an intriguing product, it still seems to be in the experimental phase. This causes some concern, but we haven’t seen any significant issues as the company finishes its second year. The bottom line Tapping into any asset early comes at a cost. Whether it is your life insurance policy or your home equity, if you tap into any asset early you will lose money. For most people, their home equity is one of their biggest assets. Thousands and thousands of dollars are in your home, so if you’re strapped for cash, this could be an option for you to pursue. This company’s services are for those who need a quick and safe solution to access a big asset. How does Sell and Stay work? Sell and Stay has five simple steps: See if you qualify. After filling out a form, you will be notified if you qualify and a representative will reach out to discuss steps. Create your customized contract. You will discuss plans, fees, and your personal situation with the representative to ensure this process meets your needs. EasyKnock buys your home, and you receive your home’s equity. You get to stay in your home. You can buy back your home from EasyKnock for the repurchase price, or choose to move whenever and the company will place your house on the market and give you the sellout value once sold. How it affects both parties
Reverse mortgages are advertised as a no worry, no stress, no liability way to access serious money fast. They are advertised so well that many people feel like reverse mortgages are too good to be true. And in reality, the freed up funds are usually accompanied by undisclosed costs, fees, and liability.If you’ve ever been intrigued by the idea of a reverse mortgage, you may have had the following questions nagging you: What are these hidden costs and fees? Are there any fees that I will continue to pay? How will I be able to afford them? The hidden fees Closing costs — $1000-3000These are estimates for the fees regarding documents and inspections needed. They depend on location, size of home, and individual agencies. Although all are not required for each situation, these are some of the documents you may need: Appraisal fee — $300-500 depending on location. $100-150 if follow up visit is required. Credit report fee — $20-60 Flood certification fee — $15 Escrow fee — $150-800 Document prep fee — $75-100 Recording fee — $50-400 Courier fee — $50 Title insurance — $500-2,000 Pest inspection — Free-$100 Survey — $100-250 Counselor fee — $125 Initial Mortgage Insurance Premium — 2 percent of the maximum claim amount This fee is charged by the government and is in place to ensure that your reverse mortgage company as well as you are not going to lose your money if the housing market crashes.Origination fee — $2,500-6,000These vary, but they are all capped by the FHA, so no one can go higher than these rates. To calculate your maximum origination fee: If your home is under $125,000, the fee has a maximum cost of $2,500. If your home is between $125,000 and $200,000, the deal is 2 percent of the property. If your home is over $200,000, then the company can charge 2 percent on the first $200,000 and then only 1 percent on anything over that. For example, if you own a home that is $500,000, you would be charged 2 percent for the first $200,000 and then just 1 percent on the remaining $300,000.Note: The FHA also has a limit of $6,000 on an origination fee, meaning no company can charge more than $6,000 for this fee. Ongoing fees Mortgage insurance premiums — Although you already paid the initial payment for this insurance, this is an annual bill that is 0.5 percent of the outstanding loan balance. While this does not have to be paid until after you sell the home, just know that it is slowly building each year.Interest — Interest is paid on your loan and is required to be paid at the end of a loan. Interest rates can change from company to company but there are two types of interest rates that you can have: Fixed interest rate: The interest rate will not change for the entire life of the loan. Variable interest rate: The interest rates will change over time. Depending on your plan, this rate can change monthly or yearly. A rate will usually be capped at 5-10 percent, depending on the company. Traditional home costs — Although you are getting a reverse mortgage and will most likely not need to pay mortgage costs anymore, that does not mean that you do not have to pay for your other house payments. You still must pay property taxes, insurance, and maintenance costs. Those who fail to pay their traditional home costs are still in danger of foreclosure. You will also pay a monthly servicing fee, usually around $30, for someone to make sure that you are up to date on your payments. How can I afford to pay these fees? Most of these fees can be financed by the proceeds of the loan. Although you will receive less money from the loan, these expenses do not have to be paid out of pocket. Reverse mortgages are not free, are not without risk, and have a variety of fees, but they are still an option. Many people have been able to prosper because of them. If you think a reverse mortgage may be the right answer for your situation, go into the process with your eyes wide open. Be smart, be curious, and be safe, making sure to look at different companies rates, fees, and plans.