Spring 2011 – Special Edition: Shop and Save…at the Bank
Other Loans: Tips to Get a Good Deal
Reverse Mortgages: These loans enable homeowners age 62 or older to borrow money from the equity in their homes and not pay anything back until the borrower moves out of the house, sells the property or dies. While there are potential benefits to a reverse mortgage, it also is a complex loan with a variety of costs and risks and it may not be the right product for everyone.
Most reverse mortgages are Home Equity Conversion Mortgages (HECMs), which are part of a program from the U.S. Department of Housing and Urban Development's Federal Housing Administration. The FHA offers two reverse mortgage products — the traditional HECM Standard and the new HECM Saver. The latter features considerably lower upfront costs for people borrowing a smaller loan amount than the HECM Standard allows.
Seniors and their families should be especially aware that the interest charges and other costs on a reverse mortgage could use up much or all of the equity in their home, leaving little or no value for the borrower or for heirs who typically will have to pay off the loan either by refinancing or selling the house.
Auto Loans: Start shopping for a loan before you walk into a dealership or bid on a new car over the Internet. Consider getting pre-approved for a loan, so you know your loan options and the likely costs before you buy a car. Also assess the true cost of the financing "specials" offered by the dealership and comparison shop based on the Annual Percentage Rate (APR), not just the monthly payment.
Small Business Loans: Your best financing option may be a small business loan from a bank instead of borrowing through either a credit card (which can be expensive) or a home equity line of credit (which would put your home at risk if you have problems paying back the loan). Start by preparing or updating your business plan — a summary of your company's goals, needs and financial projections.