Reverse Mortgages ExplainedWritten by Robert Hutchinson
A 'Reverse Mortgage', also known as 'Equity Release', is a popular way to use your main asset (your home) to free up some cash for other purposes. In a standard loan, your income stream is used to 'qualify' for loan. The bank will want to see that you have enough cash-flow from your job or other source of income in order to make payments on loan. By securing this forward loan on your house, bank has extra security. After all, if you stop paying, they can take away your house. As years go buy, you will build up 'equity', which is difference between what your house is worth, and how much you owe on loan, which will be reducing as you pay off principal.A reverse loan, in contrast, requires no proof of income, no credit checks etc, you simply have to own home you are borrowing against. The reason for this is that interest payments are 'rolled up' on reverse loan - i.e they are added to loan, and not repaid. Over time, of course, this starts to eat up your equity, because as each interest payment is added to loan, interest starts being charged on previous interest too!
| | Health Savings AccountsWritten by Chris Cooper
Most people with health insurance, especially employer paid health insurance, really don’t know what their health care costs are. Furthermore, in many cases, they are limited in which health providers (doctors, hospitals, pharmacies etc) they can use.Most people are locked into a network of doctors. They know what co-pay is, but have no idea what doctor actually charges. When insured consumers are hospitalized, they rarely see bill. They don’t know if insurance company was overcharged or not. There are firms that audit hospital bills for insurers and self insured companies. They get paid a percentage of what they save on bill payer by finding overcharges, duplicate charges and like. The last I heard these firms were still making lots of money. Overcharging, whether deliberate or not, by doctors and hospitals drive up health care costs for all. (So do malpractice suits, but that’s another story.) In order to give consumers more direct control not only over their health costs, but in choice of which doctor they can see or which hospital they can enter, Congress enacted Health Savings Account Availability Act. As of beginning of 2004, individuals who are not otherwise insured can have Health Savings Accounts (HSA) , which carry with them some very attractive tax benefits. An individual can set up an HSA for himself or his family. An employer can add an HSA option to so-called cafeteria benefit plan it may already offer. The money put into plan is before taxes, including Social Security, if part of an employer plan. Otherwise it is a above-the-line deduction, meaning you don’t have to itemize your deductions to get tax break and that deduction is not subject to phase-out rules that make many itemized deductions unavailable to high wage earners. The plan is set up like an IRA. A trustee approved by IRS must be used. Money put in plan grows tax free and funds withdrawn for qualified medical expenses are also tax free. Unlike older Flexible Savings Accounts offered in employer cafeteria plans, you don’t have to spend money put into account by year end or otherwise lose whatever’s left. Money can be rolled over from year to year. This can allow for a nice chunk of money to accumulate that can be withdraw tax free at age 65.
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