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The_Money_IDEAThe Money IDEA

The Money IDEA

Ideas on How to Save and Ideas for What to Do with Your Savings!

An underutilized retirement strategy

2/19/2018

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(BPT) - Across the nation, thousands of seniors have used a Home Equity Conversion Mortgage (HECM), commonly called a reverse mortgage loan, as a savvy way to access the equity in their homes as part of their retirement strategy.

Those who are interested in a reverse mortgage loan should know that there are six main phases to the process: 1) educating and qualifying, 2) counseling, 3) approval, 4) funding, 5) using and 6) settling.

1. Educating and qualifying

The HECM process begins by contacting an FHA-approved lender who will review the borrower’s situation, educate them on the HECM program, and determine if they would likely qualify for a reverse mortgage loan.

“Once the lender has determined that the borrower is eligible, they work closely with them to shape the loan so it fits their needs,” says Paul Fiore, Chief Sales Officer for American Advisors Group, the leading reverse mortgage lender in the nation. “At AAG, this is a highly personalized process designed to give the borrower the best outcome for their financial situation.”

2. Counseling

Once qualified, borrowers are referred to reverse mortgage counseling, an important consumer safeguard mandated by the government. During counseling, a HUD-approved HECM counselor reviews the borrower’s needs and circumstances. They consider how the funds might best be distributed, the financial and tax implications, and whether a HECM is right for them. If so, an application is submitted to the lender.

3. Approval

Next, the property will be appraised, and after that the approval process will begin. Before closing on the loan, borrowers will choose between several loan disbursement options, from taking it all out in a lump sum, receiving fixed monthly payments, opening a line of credit or any combination.

4. Funding

After the closing papers are signed, the homeowner has three business days to change their mind and cancel the loan (except if the loan is being used to purchase a new home). After the rescission period has passed, the funds are ready to be paid out through the payment option selected, subject to an initial disbursement limit that is determined by HUD.

5. Using your loan

The loan servicer will generally disburse funds via direct deposit or mail on the first business day of the month, following the funding of the loan. The borrower can live in the home as long as they like without making monthly mortgage payments, as long as they continue to pay property taxes and insurance on the home, maintain it in good condition and comply with any other loan terms.

6. Settling your loan

If the last surviving borrower sells or transfers the property, passes away, or does not use the property as a principal residence for more than 12 months, the loan has reached a “maturity event,” meaning that the loan comes due and no further funds can be disbursed. Borrowers also have the option of paying off their loan in full at any time without penalty.

Following a maturity event, an appraisal will be ordered by the loan servicer to determine the property’s current market value. The heirs can sell the property to repay the loan, or purchase the property for 95 percent of its appraised value. Since HECMs are non-recourse loans, the proceeds from the sale of the home are the only asset that can be taken to pay the loan’s balance, even if the loan amount exceeds the value of the home.

A home equity conversion mortgage can be shaped to fit an individual’s needs. With new consumer safeguards in place, many seniors are discovering that it is an important part of their retirement strategy.


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Don’t Overpay Your Taxes

2/4/2018

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With tax season in full swing, take time to consider how to get the most out of your tax return, which includes finding all the credits and deductions available to you. These often-overlooked tax breaks could potentially save you hundreds – maybe even thousands – of dollars if you itemize deductions.


Don’t Overpay Your Taxes

Commonly overlooked credits and deductions

(Family Features) With tax season in full swing, take time to consider how to get the most out of your tax return, which includes finding all the credits and deductions available to you. While many taxpayers claim common deductions, such as home mortgage interest and self-employment expenses, there are additional tax deductions that can lessen your final tax bill or increase your refund. These often-overlooked tax breaks could potentially save you hundreds - maybe even thousands - of dollars if you itemize deductions.

To start, get to know the difference between tax credits and tax deductions. Tax credits reduce the amount you owe in taxes. In some circumstances, tax credits allow a refundable credit, meaning you may not only reduce the amount you owe to $0, but you can also get money back. Deductions, on the other hand, simply reduce your taxable income. Both can have a potentially significant impact on your taxes and are often worth the extra effort to include on your return.

Some commonly overlooked credits include:

1. Child and Dependent Care Credit
You can claim a credit of up to $2,100 for day care for your dependents so you and your spouse can work. Qualifying dependents include children under 13 and parents who are no longer able to care for themselves.

2. Earned Income Tax Credit
The Earned Income Tax Credit (EITC) is a federal tax credit based on your income and the number of qualifying children living with you. Nearly 1 in 5 people who qualify fail to claim the credit, worth up to $6,318. Just because you didn't qualify last year doesn't mean you won't this year; one-third of the EITC-eligible population changes each year based on marital, parental and financial status.

3. Saver's Credit or the Retirement Savings Contributions Credit
Make sure you "pay yourself first." Even if it is only $20 each pay cycle, make sure you are putting some money into a retirement fund. If your company offers a retirement savings plan, like a 401(k), it is usually in your best interest to participate. If your income is lower than $60,000, you can receive a credit of up to $1,000 for a contribution of up to $2,000 into an IRA or an employer-provided retirement account, such as a 401(k). The credit is in addition to any deduction or exclusion from income for the contribution.

Some tax deductions that allow you to reduce your taxable income include:

1. Moving Expenses
If you moved for a job that is at least 50 miles away from your home and held this job for at least 39 weeks, you can claim your moving expenses even if you don't itemize deductions.

2. Tax-Preparation Fees
Plan for tax time. Tax laws change and so do life circumstances. Using a professional to help you file your return may be a wise investment. For example, the tax pros at Jackson Hewitt can help you get every deduction and credit you deserve and the biggest refund possible. Plus, the cost of preparing your taxes can be claimed if you itemize your deductions. In fact, one missed credit or deduction could more than cover the cost of having your taxes prepared by a tax professional.

3. New Moms
Breast pumps and lactation supplies are considered medical equipment, which means they qualify for a possible deduction.

4. Career Corner
Job hunting often means investing both time and money. However, you may be able to deduct some of the job-search expenses you incur. Costs such as preparing resumes, creating and maintaining websites, business cards, agency fees and travel expenses may be eligible.

5. Wedding Bells
If you were married in a church or at a historical site during the past year, you may be able to deduct fees paid to the venue as a charitable donation.

6. Medical Fitness
While general toning and fitness workouts to improve general health are considered personal expenses, you may be able to deduct your gym membership as a medical expense. If a doctor diagnoses you with a specific medical condition, such as obesity or hypertension, or a specific physical or mental illness, and prescribes workouts or participation in a weight-loss program to treat your illness, the membership dues may be tax-deductible.

7. Road Warriors
If you travel for business and aren't reimbursed by your employer, those costs can qualify as a deduction.

Every possible tax credit and deduction can help when money is tight. You might qualify for at least one overlooked credit or deduction - and maybe more than one. Consult a tax professional to discuss how you can maximize your refund and learn more at JacksonHewitt.com.

Refund Advance

If you're getting a refund, you typically want it as soon as possible, but that isn't always an option, especially if you are one of the millions of Americans who claim either the Earned Income Tax Credit or Additional Child Tax Credit. You could access up to $3,200 with a no-fee Refund Advance loan at zero percent annual percentage rate (APR), offered by MetaBank, at participating Jackson Hewitt locations. Terms apply, visit JacksonHewitt.com for details.

Did You Know?

1. The IRS, as well as many states, allows taxpayers to catch up on missed credits or deductions, offering a three-year window for filing an amended tax return. You can secure unclaimed credits and deductions by filing amended tax returns to avoid losing any unclaimed funds from as far back as 2014.

2. With locations across the United States, including kiosks in 3,000 Walmart stores, the tax professionals at Jackson Hewitt make it easy to stop in when it's most convenient for you.

3. If you are a single parent, you can file as Head of Household instead of Single. This filing status can provide better deduction options and a lower tax rate schedule.

Photos courtesy of Getty Images (Woman looking at computer, Man sitting on the floor with papers)

SOURCE:
Jackson Hewitt

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