A reverse mortgage to pay off

 

Reverse Mortgage

A home equity loan in which the borrower is not required to make payments. The homeowner must be at least 62 years old. A reverse mortgage accrues interest and doesn’t have to be repaid until the homeowner dies or moves out of the house. The Federal Housing Administration, or FHA, calls it a HECM, for home equity conversion mortgage.

Not only for the desperate

“Years past, financial planners didn’t view reverse mortgages as a planning tool,” says Johnson, who co-authored a study discussing the growing importance of reverse mortgages in retirement. “It was viewed as a last resort, and they assumed that the only people that do reverse mortgages are people that are desperate. Clearly that’s not the case, and I think they are starting to view it differently now.”

ADVISER SEARCH: Curious about reverse mortgages? Find a financial adviser today to help you make the right decision.

Why get a loan when you already have one?

One of the most common reasons homeowners get a reverse mortgage is to pay off their existing mortgage so they have more income to work with, says Maggie O’Connell, who runs ReverseMortgageStore.com.

“They already have this debt on the house, so instead of making their mortgage payments, they are just paying it out of their equity before they leave the home,” she says.

What it takes to get a reverse mortgage

To qualify for a reverse mortgage, the homeowner must be at least 62 years old and have sufficient equity in the house. The size of the loan depends on the value of the home, the age of the youngest borrower and how much is owed on the house. The owner must pay property taxes and insurance.

2 hypothetical examples of paying off a mortgage with a reverse mortgage

Robert is married to Linda, who at 62 is the younger spouse. Their house is worth $200,000 and they owe $62,000 on the mortgage.

Based on their ages and the home’s value, they can get a reverse mortgage for up to about $104,800. This is known as the principal limit or maximum loan amount. Closing costs, including FHA initial mortgage insurance, reduce that available amount to about $93,800.

Under FHA rules, the amount they borrow is limited in the first year. Borrowing the $62,000 to pay off the mortgage, they can take out another $10,400 in cash during the first year. A year later, the remainder is available to them.

Barbara is a 75-year-old widow with a house that’s worth $400,000. She owes $25,000 on a home equity line of credit, with no other mortgage debt.

Based on her age and the home’s value, she can get a reverse mortgage for up to about $245,600 (the principal limit). Closing costs, including FHA initial mortgage insurance, reduce the available amount to around $234,900.

Under FHA rules, she can get a reverse mortgage, pay off the HELOC balance and take out up to around $111,600 in cash during the first year. A year later, the remainder would be available to her.

 

Find the great city for your life

Saving for the down payment, finding the right property and arranging financing can seem like getting a second job, but a successful purchase shouldn’t be the only goal. Just as important is living with a home.

“Successful ownership should be the goal,” says Lawrence Yun, chief economist with the National Association of Realtors.

So what are the best, and worst, cities in America to own a home?

That’s what Bankrate, using a variety of data sources, set out to find in our first such survey of major metropolitan areas.

We wanted to learn where living with a home over the long term is both easier and more beneficial.

RATE SEARCH: Try shopping today for the best mortgage deal on Bankrate.com.

Here, in ascending order, are Bankrate’s rankings of the 10 major U.S. cities, based on metro areas as they’re defined by the U.S. Census Bureau, that provide the best combination of reasonable costs and benefits for homeowners.

The Music City isn’t just a great place to start your country music career, it’s also a pretty good place to own a home these days.

Where Nashville ranks higher: Nashville’s property taxes were the 4th-lowest among the 50 most populous metro areas, averaging $1,519 for a single-family home in 2014, according to the most recent data from Attom Data Solutions. Nashville also had the 4th-lowest average monthly energy bill, at $144.05, according to the Council for Community and Economic Research.

Where Nashville ranks lower: Tennessee’s annual homeowner insurance bills are in the middle of the pack, averaging $1,090 a year. Annual home price appreciation over the past 5 years has been close to the average, too, at 6.7% a year.

Benefits for Louisville homeowners go beyond bourbon and thoroughbreds. The city is one of the most affordable among the 50 we surveyed.

Where Louisville ranks higher: The Louisville area ranked 3rd in housing affordability because it typically takes just 22% of monthly income to buy a home, compared with the national average of 37%. And the average monthly energy bill, $132.60, was the 2nd-lowest among the 50 largest metro areas, behind only New Orleans.

Where Louisville ranks lower: Louisville ranks 37th in home price appreciation because prices have risen an average of just 3.45% a year over the past 5 years. On the other hand, slow home price appreciation boosts Louisville’s affordability, which is good news for people who haven’t bought yet.

Rising home prices could help homeowners in Denver achieve mile-high returns when it’s time to sell.

Where Denver ranks higher: The Denver metro area has relatively low property taxes and monthly energy costs; it ranks 11th in both categories among the 50 most populous metro areas. And home price appreciation is a bright spot, too: Denver ranks 10th, with home values growing at average compound annual rate of 10.5% over the past 5 years.

Where Denver ranks lower: Colorado’s property insurance costs meant that Denver was the 18th-highest among the 50 biggest metro areas, at $1,160 a year. And Denver has had the 10th-highest foreclosure rate over the past 3 years.

Learn about Social Security at risk

download (3)You can retire, file bankruptcy and walk away from the house without worrying about any repercussions from the Department of Veterans Affairs, or VA, or Uncle Sam. I don’t know of any reason why the government would come after you.

While this might not matter much to you, since you and your wife are on such a limited and fixed income, the VA does not look kindly on anyone who walks away from one of its loans. The agency cannot do anything against you personally, but you would find it very difficult to obtain another mortgage loan through the VA in the future.

You ought to contact the VA prior to making this decision. If the mortgage is the only reason you are filing for bankruptcy, you likely could avoid the bankruptcy altogether. The VA has various payment options available, though you would also need to contact the loan servicer. The loan servicer is not the VA itself, but is a public or private entity that collects, monitors and reports loan payments; handles property tax, insurance escrows and late payments; forecloses on defaulted loans; and remits payments on behalf of VA loans.

RATE SEARCH: Comparison shop for a VA loan today.

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In many cases, the loan servicer can be difficult to contact. Many people say that reaching a representative to discuss loan workout options can be nearly impossible. The VA has loan technicians in 8 regional loan centers and 2 special servicing centers who actively help veterans communicate with loan servicers.

Here are a few of the options that are available to you if you are willing to make the effort:

Special forbearance. You could be given time to get caught up on delinquent payments. Maybe you know you are going to receive a large tax refund that could bring the delinquent payments current. The VA will contact the loan servicer so that it does not begin foreclosure.
Loan modification. You may be able to reduce your mortgage payment through a modification of the loan terms.
Additional time for a private sale. The property may have a little equity, and you could request a delay in the foreclosure process while you sell the house.
Short sale. The loan servicer may agree to let you sell the property for less than what it’s worth.
Deed in lieu of foreclosure. You voluntarily agree to turn the property over to the servicer instead of going through a lengthy foreclosure process.
Ultimately, you need to decide whether it is easiest to simply notify the lender that you are walking away from your VA loan and move out. Though there’s no risk to your Social Security, I just think it’s worthwhile to explore your options before making a final decision.

The right mortgages that require little down payments

Homebuyers with little money for a down payment are finding more home loans available for a low-down payment or even no down payment.

The Federal Housing Administration, or FHA, insures loans with small down payments, and private mortgage insurers have relaxed their down-payment requirements. It’s even possible to get a mortgage today with no money down. The nation’s biggest credit union offers “zero-down” mortgages. The Department of Veterans Affairs, or VA, and the Department of Agriculture, or USDA, guarantee home loans with no down payments.

Following are a few options for borrowers seeking low-down payment and zero-down payment home mortgages.

The VA guarantees purchase mortgages with no required down payment for qualified veterans, active-duty servicemembers and certain members of the National Guard and Reserves. Private lenders originate VA loans, which the VA guarantees. There is no mortgage insurance. The borrower pays a funding fee, which can be rolled into the loan amount.

For purchase and construction loans, the VA funding fee varies, depending on size of down payment, whether the borrower served or serves in the regular military or in the Reserves or National Guard, and whether it’s the veteran’s first VA loan or a subsequent loan. The funding fee can be as low as 1.25% or as high as 3.3%.

For 1st-time purchasers making no down payment, the funding fee is 2.15% for members or veterans of the regulator military, and 2.4% for those who qualify through service in the Reserves or National Guard.

Navy Federal Credit Union, the nation’s largest in assets and membership, offers 100% financing to qualified members who buy primary homes. Navy Federal eligibility is restricted to members of the military, some civilian employees of the military and U.S. Department of Defense, and family members.

The credit union’s zero-down program is similar to the VA’s. One difference is cost: Navy Federal’s funding fee of 1.75% is less than the VA’s funding fees.

What’s the kind of stocks trading

Typically, September is associated with a return to upside moves. It’s the month you start buying stocks again if you subscribe to the old adage of “sell in May and go away.” That’s not to say that September is historically an outright bullish month for stocks; most statistical studies of stock market seasonality actually show that September is one of the few months that tends to be negative, on average.

 

But in the last 20 years, September performance in the big S&P 500 index has been pretty evenly split between bullish and bearish years. It’s just that, while the up years have been big, the down years tend to be bigger when they do occur.

From a trading perspective, that increased volatility in the stock market spells an opportunity. To take advantage of it this month, we’re turning to the charts for a look at five stocks that are teetering on the edge of breakout territory. Today, we’ll take a closer look at what the price action is saying about them – and when you should buy.

 

First, a quick note on the technical toolbox we’re using here: Technical analysis is a study of the market itself. Since the market is ultimately the only mechanism that determines a stock’s price, technical analysis is a valuable tool even in the roughest of trading conditions. Technical charts are used every day by proprietary trading floors, Wall Street’s biggest financial firms, and individual investors to get an edge on the market. And research shows that skilled technical traders can bank gains as much as 90% of the time.

 

Every week, I take an in-depth look at big names that are telling important technical stories. Here’s this week’s look at five big stocks to trade.

Up first on our list today is $7 billion real estate investment trust Apartment Investment and Management (AIV) , better known as Aimco. This residential housing REIT has been a stellar performer in 2016, up almost 13% on a price basis since the calendar flipped to January. But don’t worry if you’ve missed the move in Aimco. This stock could be about to kick off a second leg higher in September.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks with serious upside potential in the next 12-months. Learn more.

Aimco is currently forming an ascending triangle pattern, a bullish continuation pattern that’s formed by horizontal resistance up above shares (at $46) and uptrending support to the downside. Basically, as Aimco bounces between those two technically significant price levels, shares have been getting squeezed closer and closer to a breakout through their $46 price ceiling. When that happens, we have our high-probability buy signal in this stock.

 

Relative strength, which measures Aimco’s performance versus the rest of the broad market, is looking bullish here. Our relative strength line has been forming an uptrend since December, indicating that Aimco is still beating the rest of the market, even now. Once $46 gets taken out, it’s time to buy.

Know the cause of REITs Breaking Out

Just six months or so ago, higher interest rates from the Fed seemed like a near-certainty, sending interest-sensitive stocks such as real estate investment trusts, utilities and MLPs plummeting at the start of 2016. Since then, though, things haven’t quite worked out the way Wall Street expected.

 

Interest rates, for instance, haven’t been touched since last December, when Janet Yellen & Co. increased the fed funds rate for the first time in about a decade. One result of that do-nothing interest rate has been that REITs have been playing catch-up all year long, rebounding from the rate hikes that never happened and making up for the mispricing.

 

For instance, the SPDR Dow Jones REIT ETF  (RWR)  , which tracks a basket of REITs, is up 9.5% year-to-date, stomping the broad market on top of a whopping 4.2% dividend yield.

SMALL INVESTMENT, BIG POTENTIAL. TheStreet’s Stocks Under $10 has identified a handful of stocks with serious upside potential. See them FREE for 14-days.

But don’t worry if you’ve missed the upside in the REIT world lately. As strong as the price action has been in REITs in 2016, many of these issues look ready to blast off with another leg higher this fall. To figure out which REITs are in play here, we’re turning to the charts for a technical look at five big real estate investment trusts to buy for gains…

 

In case you’re unfamiliar with technical analysis, here’s the executive summary:Technical analysis is a way for investors to quantify qualitative factors, such as investor psychology, based on a stock’s price action and trends. Once the domain of cloistered trading teams on Wall Street, technicals can help top traders make consistently profitable trades and can aid fundamental investors in better planning their stock execution.

 

Without further ado, here’s a rundown of five technical setups that are showing solid upside potential right now.

Up first on the list is $5 billion senior living community landlord Senior Housing Properties Trust  (SNH) . SNH has been a serial outperformer in 2016, rallying more than 47% since the calendar flipped to January. Despite the size of the up-move, this trust still pays out a huge 7% dividend at current price levels. Even better for SNH shareholders, this stock could be heading even higher in the near-term thanks to a bullish price setup on the chart.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks with serious upside potential in the next 12-months. Learn more.

SNH is currently forming an ascending triangle pattern, a bullish continuation setup that’s formed by horizontal resistance up above shares at $22.50, and uptrending support to the downside. Basically, as SNH bounces in between that pair of technically significant price levels, it’s been getting squeezed closer and closer to a breakout through our $22.50 price ceiling. When that breakout move happens, we’ve finally got a buy signal shares.

 

Relative strength, which measures Senior Housing Properties Trust’s price performance vs. the rest of the stock market, is an extra indicator to keep an eye on here. That’s because SNH’s relative strength line is holding on to an uptrend since the end of last year, an indication that this big REIT is continuing to outperform this spring. As long as that relative strength uptrend remains intact, expect to see continued outperformance from this stock.

Is the Stock useful

Put down the 10-K filings and the stock screeners. It’s time to take a break from the traditional methods of generating investment ideas. Instead, let the crowd do it for you.

 

From hedge funds to individual investors, scores of market participants are turning to social media to figure out which stocks are worth watching. It’s a concept that’s known as “crowdsourcing,” and it uses the masses to identify emerging trends in the market.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks with serious upside potential in the next 12-months. Learn more.

Crowdsourcing has long been a popular tool for the advertising industry, but it also makes a lot of sense as an investment tool. After all, the market is completely driven by the supply and demand, so it can be valuable to see what names are trending among the crowd.

 

While some fund managers are already trying to leverage social media resources like Twitter to find algorithmic trading opportunities, for most investors, crowdsourcing works best as a starting point for investors who want a starting point in their analysis.

 

Today, we’ll leverage the power of the crowd to take a look at some of the most active stocks on the market.

Leading off our list of big-volume stocks is banking giant Bank of America  (BAC) . BofA is pushing just over 1% higher during an active trading session this afternoon, driven by the technical move that shares actually triggered more than a week ago.

SMALL INVESTMENT, BIG POTENTIAL. TheStreet’s Stocks Under $10 has identified a handful of stocks with serious upside potential. See them FREE for 14-days.

After flirting with a breakout through $15 resistance for most of 2016, shares finally broke out above that long-term price ceiling in August. Since then, Bank of America has been shoving its way higher on the way to resistance up at $18.

 

This stock’s momentum story looks attractive right now. If you haven’t bought Bank of America yet, there’s still plenty of upside room on the way to $18.

Find the isead of deliver big gains

We’re still experiencing a tale of two markets as we round the corner for the final week of August – while the S&P is up a bit over 5% year-to-date, nearly half of the stocks in the big index are actually up 10% or more since the calendar flipped to January. Simply owning more of the stocks that are working in this environment and fewer of the ones that aren’t could hold the keys to substantial outperformance this year.

SMALL INVESTMENT, BIG POTENTIAL. TheStreet’s Stocks Under $10 has identified a handful of stocks with serious upside potential. See them FREE for 14-days.

To lock onto which stocks you’ll want to own in the month ahead, we’re turning to a fresh set of Rocket Stocks to buy for gains this week.

 

For the uninitiated, Rocket Stocks are our list of companies with short-term gain catalysts and longer-term growth potential. To find them, I run a weekly quantitative screen that seeks out stocks with a combination of analyst upgrades and positive earnings surprises to identify rising analyst expectations, a bullish signal for stocks in any market. After all, where analysts’ expectations are increasing, institutional cash often follows. In the last 364 weeks, our weekly list of five plays has outperformed the S&P 500’s record-breaking run by 79.6%.

 

Without further ado, here’s a look at this week’s Rocket Stocks.

Leading things off is social networking giant Facebook  (FB) . At a glance, it’s not hard to see that Facebook has been a leader in 2016. Since the calendar flipped to January, this big stock has rallied nearly 20% higher, leaving the rest of the broad market in its dust. And that outperformance looks likely to keep up as Facebook pushes up on all-time highs.

 

Facebook is the most popular Web site on the Internet. In total, Facebook boast 1.6 billion monthly active users worldwide, an utterly massive user base that creates equally big growth opportunities for Facebook’s revenue model. The firm has been increasing its monetization efforts lately, and improvements in the firm’s ecosystem of apps is helping to drive user engagement. By extension, that’s boosting the number of ads Facebook can serve.

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Ad revenues made up more than 90% of Facebook’s total sales last year, but it’s where those sales dollars came from that tells investors quite a bit about this company’s growth potential. For instance, while U.S. users only make up about 15% of traffic, they generate nearly half of Facebook’s ad sales. If the firm can ramp up its monetization in other markets to even a fraction of what it sees here at home, then the growth potential is immense.

Put simply, Facebook has Wall Street convinced that its best days are ahead of it — and for good reason.

Facebook is a holding in Jim Cramer’s Action Alerts PLUS charitable portfolio. On Friday, Cramer and Research Director Jack Mohr wrote that they:

wanted to provide subscribers with a view of how we make sense of an important event such as the Olympics, and how we learn with an investment perspective in mind. We think the Games truly gave a peek into the captivating capabilities of Facebook, and to a broader extent, the ongoing evolution of the media landscape, with Facebook emerging as a dominant force. We can be assured that Facebook’s ability to engage users does not go unnoticed by its true customers, the advertisers.