Learning about Reverse Mortgages

It’s pretty surprising how many financial instruments there are out there. Some you may be familiar with and some not. That’s particularly the case as different countries have different ideas and products that are introduced from time to time. For example, today I came across Reverse Mortgages, a concept I had never heard of before. It was on a U.S. based website, and I’m not sure if there are similar products here in the British Isles that you can just walk into a financial institution and pick off the shelf.

Here’s how a reverse mortgage works. A reverse mortgage is really just an equity loan secured by your home, designed to defer the mortgage interest. This means that you can borrow a sum of money against the house you’re living in, which will be repaid (together with interest) on your demise or when you decide to move out of the house. You can choose to pay it back at any time, but if you decide not to, it will be down to your heirs or estate to settle the amount after they have sold your house. I don’t know how it works in other countries, but based on what I was reading in the U.S. you have to be 62 years old or older and have substantial equity in your home before you are eligible for a Reverse Mortgage.

So, is a Reverse Mortgage a good idea or not? Well, it all depends on your circumstances I guess. Personally I like the idea that my property will be inherited by my kids, so I would probably never go down that route, but I’m sure there are people out there who would be interested in something like this. I can think of a number of cases, like if there are no heirs, or if someone needs a cash infusion which they are planning to pay off, then it might be just right for them.

The thing about investments and financial products is that you should always get advice from the experts. Find someone who you trust for advice and ask them what they think. And don’t be afraid to get a second opinion either. I don’t consider myself an expert in this field, so would always look to learn more before deciding to embark on something like this. Remember, a perfect solution for one person may not necessarily apply to someone else, as everyone’s circumstances are different.

Building a blog to retire off the proceeds? Think again!

And interesting post on Techmeme started my day this morning called Time To Hang Up the Pyjamas. It was an article by Daniel Lyons who had set up a highly-trafficed blog called The Secret Diary of Steve Jobs a couple of years ago. The gist of the article is that he put loads of effort into monitising the blog, but failed to generate anything that would surpass what he could earn holding down a normal job. Here’s a poignant part of his article:

My first epiphany occurred in August 2007, when The New York Times ran a story revealing my identity, which until then I’d kept secret. On that day more than 500,000 people hit my site—by far the biggest day I’d ever had—and through Google’s AdSense program I earned about a hundred bucks. Over the course of that entire month, in which my site was visited by 1.5 million people, I earned a whopping total of $1,039.81

A number of other blogs were quite quick to point out that the blog resulted in his rise to relative fame, a book deal and his new job at NewsWeek, but millions of bloggers around the world will never earn as much from AdSense as he did. What he DID DO, however, was raise his profile so that his net worth was much higher than it would have been otherwise.

Articles like this always help put blogging in perspective and help people focus on the why they blog. Using a blog to earn money isn’t impossible, there are a number of companies out there who will pay a blogger for their efforts, but it’s no different to being paid for dropping leaflets in someone’s mailbox. The amount you can earn is constrained by the time you have available and the moment you pull back you’ll see your earnings dry up. Selling advertising space on blogs is another money-earner, but without fresh, compelling content and the traffic it brings, well, that’s another non-starter. In my humble opinion, the worst reason to start a blog is to generate enough income to quit your day job.

On the other hand, a blog can do wonders for your profile, image and self-esteem. It can serve as an outlet for you to talk about your passion, to meet like-minded individuals, to show off your strengths and seek opportunities. A blog can help you build online relationships which will benefit you in the long term in many diverse ways. Monetary benefits are a possibility, but they’re always much harder work than you originally imagined when you decided to set down the blogging path.

photo credit: Dan4th

Making Money Online

Dollar bills in cash register

I just came across some links that are all about making money online.

Source: WorkConnexions

Do YOU have any other links you’d like to recommend for the list?

Cash machine

How much do you earn?

I came across an interesting report today that’s an IT Salary Survey for 2008. It’s a survey conducted by Global Knowledge, a global leader in IT and business training together with TechRepublic, an online magazine and social network for IT professionals. The report comes up with some great facts and figures that are based around the U.S. IT industry particularly around salaries and skills.

Did you know for example that nearly half of those responding earn a salary between $45,000 and $85,000 per year in nearly equal groups. Here’s a chart of how salaries are split into bands showing the ranges of all the respondents to the survey placed themselves in:

salary.JPG

My favourite sections are the ones that are relevant to a global market, particularly the parts outlining Top Tech skills that employers are looking for, and Top Certifications that actually mean something. But don’t just take my word for it, read it for yourself

Bank of England Rate stays steady

Looks like the Bank of England has kept interest rates steady at 5.25%. There was a drop only recently so I wasn’t expecting them to drop any further, but like anyone with a mortgage, I would have minded too much if they had gone down a bit more.

Speaking about mortgages, I did have an interesting experience yesterday. My mortgage is with Abbey and after my 2 year “special deal” my interest rate had risen to their Standard Variable Rate (SVR) last year, which is slightly more than 2% above base rate. As it’s good practice to do, I was ready to switch mortgage to a new mortgage, but in October offered me a 0.04% above base rate deal, which I thought was pretty good. In January this year, I noticed that my mortgage repayments hadn’t dropped so I phoned up to see what was happening. They acknowledged that there had been a problem there end, they would sort it out and backdate the mortgage switch, giving me a refund on the extra interest I had paid.

Yesterday, I noticed that my mortgage payment STILL hadn’t dropped, so I phoned them up again. Once again they acknowledged that there was no problem with my application, but that “the team that was handling my case, no longer existed”. Wow! This was 6 months down the line and they STILL hadn’t managed to effect a change that couldn’t really have taken more than a few minutes! I can only say I was NOT impressed!

Anyone else had any mortgage woes they would like to share?

How low can you go?

Like most of the people in the UK (apparently) I owe lots of money to the bank. Not that I borrow money on a regular basis or that I overdraw my credit cards, but rather I had borrowed hundreds of thousands of pounds a few years ago so I could buy a house. Which basically means I’ll be spending most of my working life paying it back. Anyway, so like everyone else who’s in debt, I keep an ear out for what the Bank of England Base Rate is doing and always feel better when I hear it’s going down!

Well, according to some experts, the Base Rate may drop as low as 4%. And that’s pretty good news for anyone who has borrowed money. Basically, a 0.25 percentage point rise, for example, would push down monthly repayments on a £150,000 interest-only loan down by £31.25 – or £375 a year. So you can see how a drop of 1.5% can be really helpful to anyone who has borrowed money (or is looking to borrow money). Basically, if you’re planning on borrowing money for Mortgages or Secured Loans, then the lower the interest rate; the better.

A drop in interest rates isn’t good for everyone of course. Besides mortgage rates dropping it also means that savings rates drop. This means that people who are cash positive and have money in the bank will be getting less interest on the amount. But, I guess, some people win and some others lose.

What about you? Do you have owe more money on your mortgage .. or are you cash positive and are living off the interest on your earnings?

Mortgage Comparison

It seems that there are more and more comparison sites springing up on the Net. It’s a great medium for that sort of business, as one can now automate comparison across different services as more and more companies push their offerings online and provide APIs to them. I came across Money Magic today while looking up some mortgage information and I wanted to bookmark them for the future. They offer all sorts of information about mortgages, lenders and guides to different products. They can also come up with a number of quotes from different companies and this service is free.

One thing I learnt today is that there are instruments called 125% Mortgages. These are usually made up of a 95% mortgage on property together with a 30% unsecured loan. This is particularly useful for people who have trouble getting a deposit together, or if you’re planning to do some work on the property after you buy it. Must keep that in mind next time we’re looking at property!

That reminds me. I need to get in touch with my mortgage company. They offered me a better rate a few months ago, but it doesn’t seem to have kicked in!