#how does a equity loan works

[todaynewsonline]

How to Get a Startup Business Loan with No Money

How to Get a Startup Business Loan with No Money:- Starting a business is a dream for many entrepreneurs, but the biggest challenge they face is financing their ideas. While most people believe that starting a business requires a lot of capital, this is not always true. There are several ways to get a startup business loan with no money, and in this article, we will explore some of the best…

[seniorsfirstau]

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[exuberantocean]

There's a mindset that I've seen in a lot of conservatives growing up that, to my alarm, I've seen a lot of tumblr folk taken on much to my alarm. And that's the concept of the lowest common denominator.

Let me explain. About 15 years ago, one of my brothers got in a fight with our mom. He (a conservative) argued that Mom shouldn't have her health insurance because he worked longer, harder hours than she did and he had incredibly shitty health insurance which he had to pay a lot more for. Rather than arguing that he should have equal health insurance, he was arguing she should have less. Growing up with a very politically mixed family, I noted that my conservative family members always argued that others should have less while my liberal family members would argue others should have more.

I've seen this mindset popping on tumblr more and more frequently. Someone will post either celebrating increased access to something or arguing for some public good, only for someone else to retort "we'll I don't have it" or "well not everyone can do that" with the heavily implication that we just shouldn't do that for anyone. For example, someone might post about how we need more walkable cities, only for someone to angrily write against it "well some people can't walk." Or celebrating student loan forgiveness just to have someone rant that, you know, not everyone got to go to college or that they've already paid theirs in full.

I...I'm at a loss really. Does equity really look like everyone living their worst possible life to you? Do you think those that are suffering the very most in the world right now are thinking "Gee, I wish everyone else was homeless and hungry like me" or do you think they want to rise out of their situation? Liberalism to me and from what I've seen in my 40+ years of life has always been about pulling up as many people as possible. It's not "some people can't walk so let's not make walkable cities" but rather, "let's make sure those walkable cities are also accessible to the disabled too." It's not "I have shitty healthcare so everyone else should lose their healthcare" but rather, "I and everyone else deserves good healthcare too."

Let's not go backwards.

[poipoipoi-2016]

@youzicha

#trying to understand wtf is happening to svb because uh. i want my salary

The business model of banks

The way banks work is that they take in deposits and make loans.

So I put money in a bank, but ALSO I took money out of a bank to get a car loan which let me buy the car that I used to commute to work to pay off the car loan. And also drive to Death Valley. GOOD little car. Could go from Vegas to SF on a tank of gas.

What this means from a bank's perspective is that your bank balance is a problem and the loans they make are assets. Because you took in $20K of deposits and then gave me an $18K car loan that I paid back at $400/month for 5 years. And at the end of 5 years, you will have taken $18000 and turned it into $24000.

And if one person asks for $2K back, you have $2K. And if someone(s) a year from now asks for $10K back, you have:

$2K in cash

But also the $4800 in cash I paid you last year. Minus the amount of money you spent last year running the actual bank.

The money used to found the bank (The Equity)

The ability to shop around and say "Poi is going to pay us $400/month every month for the next 4 years and if he stops doing that, you get a gently used Chrysler 200 to sell. How much are you willing to give us for that cashflow?" <- THIS IS THE PROBLEM

So as long as you are:

Liquid, meaning that you can give people their money back when they ask for it

Solvent, meaning that if EVERYONE asked for their money back, you'd sell off all the loans you'd made, give them their money back, and also have a >$0 pile of cash to go Scrooge McDuck in after you shut down the bank.

you get to keep existing.

If you're liquid, but non-solvent and somehow manage to hide it, this is called Bernie Madoff. But also "The Bank of Japan in 2023".

If you're solvent, but non-liquid, someone rolls up and buys your assets for "The value of your liabilities and also this Snickers Bar" and that's a pretty standard action.

And if you're non-liquid and insolvent, uh look crypto is weird but go look at FTX. There's a list of creditors and several months or even years from now, you'll get a fraction of your deposits back based on the recovery value of the underlying assets.

What specifically happened to SVIB

So you are a bank in 2019. And specifically, you are the Bank of Startups. And startups are very bad loan risks and also have giant piles of VC checks so they don't actually need loans.

$200 Billion of VC checks in fact. Which they gave to you. And because you're a good bank, you put $20 Billion in the cushion fund and now you have to figure out how to use $180 Billion to generate enough money to keep running the bank.

Unfortunately, it's 2019 and all the liquid risk-free assets pay 0.08% and that's not enough money to pay your bank tellers. So you make a (in retrospect dumb, in practice I'm not sure it's dumb enough I scream just at SVIB) decision to put it into:

A bunch of Treasuries that pay 1.5% or so

A bunch of mortgage-backed securities which are default risk-free b/c of post-2008 reforms. If someone forecloses, the government pays you back at par.

Corporate bonds which are risky but hey that's why you charged 5% right?

So these are illiquid, but they're not like... that illiquid and if interest rates ticked up a percentage point, a 5-year bond with 3 years to go is still like 98% of face value, it's totally fine.

And now you have $4-6 Billion/year to pay your bank tellers with and also improve that cushion.

And if you don't do these things, Silicon Valley Investment Bank does not exist. CHASE BANK does not exist. This was a prerequisite to having banking services in this country post-2008 in literally 0 interest rate environments.

And then the Fed goes on a historically unprecedented interest increase. So your 1.x% bonds are now competing in the market with 5% bonds and your 2.6% mortgages are competing with 7% mortgages and hoooo boy.

A 2.6% $400K mortgage pays you $20K/year and is currently worth $260K at 7%. $180 Billion of assets marked down to ???? Billion. 7 years to break-even and your bank tellers need to get paid.

Now for most banks, this isn't a problem. They're an actually profitable Bernie Madoff by design as a feature. They can't give everyone their money back, but they don't have to. And the bonds are paying up and the mortgages are paying up and 5% nominal GDP growth isn't a lot, but it's something and of course, you're making NEW loans at 7% so if you can just keep paying 0% interest on bank deposits and keep pulling in 7% interest loans, you'll make it out of the next few years, and you're suddenly solvent again.

Except for you.

Because you are the Bank of Startups.

And when interest rates went up, VC funding went down. So you have these perfectly good businesses (for now at least) that are constantly and continuously drawing down on their bank accounts.

And remember, this isn't 1982. You're only making 2%. Your cap ratio is 5%. All those mortgages paying in 5% of book value every year and if you get out over your skis, you cease to exist. You're going to hear the words "Duration Risk" a lot and this is that.

So you try to do an equity raise. You'll sell the rights to some of that 5% cashflow (and remember, it's increasingly 7% interest/10% cap which is slightly more exciting) in exchange for the money you need NOW TODAY to pay out your withdrawals.

At which point Andreesen goes "Uh what my friends?", tells all of his buddies to pull their cash, and $42 Billion gets withdrawn in less than 24 hours. Leaving $160 Billion behind.

And now we remember that bank accounts over $250,000 (IE: One paycheck at a $6.5 Million payroll company) aren't technically FDIC insured.

Lessons Learned

And the thing is that I really can't just blame SVIB here. They got stuck in a pretty terrible trap caused by the US Government. And the US Government likes it when you buy Treasuries and likes it when you buy and SVIB was, more or less, doing the things you as a society wanted them to do.

And the Federal Reserve explicitly destroyed them for it.

Don't get me wrong, they were weird. But I'm not sure they were weird enough especially given the constraints of 2019-2021 that I can just go "Eh, screw them". Spread that blame AROUND.

And any bank that can survive a FORTY PERCENT drawdown in the value of the underlying assets.... isn't a bank. At least not as we mean it here in 2023. The Fed's stress tests involve a 'severely adverse scenario' where 10-year US Treasury yields are at 0.7% (and only get to 1.5%). They're currently at 3.6%.

The second set of lessons that we learned today goes like this:

There are lots and lots and LOTS of reasons that small or medium businesses might temporarily or permanently want more than $250K in raw USD cash in a bank account at some point. This is now a banking risk. (There's some tricks you can play if you're really large, but those also have limits)

However, if you bank at Chase Bank (or any other bank on the too-big-to-fail list), you are infinitely insured. Because CHASE BANK is backed by the entire combined firepower of the US Government and banking sectors. If Chase Bank stops existing, the nukes have fallen.

So why would I ever use a local bank for anything at all ever again? At which point you now get another round of contagion in the system where everyone gets out of these regional banks. Because remember, EVERY BANK IN THE WORLD INCLUDING THE BANK OF JAPAN is now insolvent.

Because they were destroyed for the crime of "Doing exactly we wanted them to do". Oh sure, in a risky sort of way, but see that note above about the Fed Stress tests.

Where "What we wanted them to do" involved buying government debts

Are you uh... 100% absolutely certain you want to be teaching those lessons? That if you buy US Treasuries, you will be destroyed for your crimes? That if you use a regional bank and they are destroyed for their crimes of making loans to the Feds, your business dies with it?

[infamousbrad]

They had "pig butchering" scams in the 1930s.

Please tell your friends and family about this, because you don't know who doesn't know this. I forget how many people don't know this, too, but then I remember that I learned about it from a 1940 non-fiction best-seller that I only heard about because it was popular among 1940s and '50s science fiction authors. (And then later made into a movie called "The Sting," which, via a long chain of copies, also got made into a long-running TV series called Leverage.) The story goes like this:

The Roper identifies and ropes the Mark, who gets handed off to the Grifter, who Shows the Mark the Store. The Store Baits the Hook, then puts the Mark On the Send, and then Stings the Mark when they get back to the Store, and then Blows them Off.

I just got around to watching the John Oliver episode about what the FBI now calls "pig butchering" scams, and, having read David Maurer's original 1940 book about the professional jargon of long-con confidence artists, The Big Con, I recognized every step of it. I spent the whole segment saying the same thing over and over again: "Oh, is that what they're calling that now?"

Do you believe that basically every rich person in the world got rich because they got away with some scam? Of course you do. But are you more jealous than angry? Do you wish someone who knew you would like you enough to let you in on the scam? That's why you're a Mark.

A Roper is a person who's trained in how to go into places where it's normal to have conversations with strangers (back then, cross-country trains and inter-continental ocean liners; nowadays, your smartphone) and easily make friends. Most of the Roper's new friends quickly get ignored; what they're looking for is a resentful, jealous middle or upper middle class person who wishes someone would tell them the illegal way to get rich.

That's when the Mark finds out that the Roper is in the middle of getting rich him/herself! Thanks to The Grifter! And asks the Mark would you like to meet the Grifter?

The Grifter works out of the Store; Ropers bring Marks to him/her. The Store looks entirely convincingly like a place (or an app or a site) where someone dirty, on the inside, could easily cheat people out of tons of money, by doing things like trading on secret information. And the Mark is happy to find out that the Grifter could easily make tons of money for them if they had anything to invest in the Store. The Mark hands over the small amount of money they have on them and, very quickly, the Grifter Baits the Hook: gives them their winnings, and apologizes for how small they were. If only the Mark had more money to invest ...

At which point the Mark, who is On the Send, goes back home and empties out savings, takes out one or more equity loans, maybe even embezzles from his/her work (fully intending to put the money back) and brings it all to the Store.

At which point, instead of getting back winnings, the Mark gets Blown Off. If the Grifter does it smoothly, they can sting the same Mark over and over again: "It's not our fault, you did it wrong." Or "it's not our fault, this time the cops intervened, you're lucky you weren't arrested."

Any newly met "friend" who offers to tell you how to get rich is not your friend. You're the Mark and they're the Roper. The "way to get rich" method they offer you, that looks like it couldn't possibly be fake, too many people would have to be in on it? Is a Store, and they're making so much money off of Marks like you that they can easily hire that many people to play their parts. Oh, but the first time you tried it, you made money? Of course you did; how else would they put you On the Send? And when you come back from being put On the Send, you're not going to get rich, you're going to get Blown Off.

[anniekoh]

Two books on the pathological optimism of mainstream American discourse. 

Ehrenreich begins with her experience with breast cancer and the ubiquitous infantilizing teddy bears. One breast cancer foundation distributed gift totes that included rhinestone bracelets and a pink journal with a box of crayons. “Certainly men diagnosed with prostate cancer do not receive gifts of Matchbox cars.”

Bright-sided: How Positive Thinking is Undermining America by Barbara Ehrenreich (2009)

A sharp-witted knockdown of America's love affair with positive thinking and an urgent call for a new commitment to realism.

Americans are a "positive" people -- cheerful, optimistic, and upbeat: This is our reputation as well as our self-image. But more than a temperament, being positive is the key to getting success and prosperity. Or so we are told. In this utterly original debunking, Barbara Ehrenreich confronts the false promises of positive thinking and shows its reach into every corner of American life, from Evangelical megachurches to the medical establishment, and, worst of all, to the business community, where the refusal to consider negative outcomes--like mortgage defaults--contributed directly to the current economic disaster. With the myth-busting powers for which she is acclaimed, Ehrenreich exposes the downside of positive thinking: personal self-blame and national denial. This is Ehrenreich at her provocative best--poking holes in conventional wisdom and faux science and ending with a call for existential clarity and courage.

This reminder of how horribly wrong the economists were in the lead up to the 2008 mortgage/financial crisis from Ehrenreich.

Professional optimists dominated the world of economic commentary, with James Glassman, for example, a coauthor of the 1999 book Dow 36,000: The New Strategy for Profiting from the Coming Rise in the Stock Market, winning a job as a Washington Post columnist and showing up as a frequent news show guest. Escalating housing prices were pumping up the entire economy by encouraging people to use their homes “like ATMs,” as the commentators always put it -- taking out home equity loans to finance surging consumption -- and housing prices were believed to be permanently resistant to gravity.

David Lereah, the chief economist of the National Association of Realtors, published a book in 2006 entitled Why the Real Estate Boom Will Not Bust and How You Can Profit From It and became “the most widely cited housing expert” at peak of housing bubble.

And how self-help culture nestles into Christian frames

As sociologist Micki McGee writes of the positive-thinking self-help literature, using language that harks back to its religious antecedents, “continuous and never-ending work on the self is offered not only as a road to success but also to a kind of secular salvation.” The self becomes an antagonist with which one wrestles endlessly, the Calvinist attacking it for sinful inclinations, the positive thinker for “negativity.”

Never Saw It Coming: Cultural Challenges to Envisioning the Worst by Karen A. Cerulo (2006)

People—especially Americans—are by and large optimists. They’re much better at imagining best-case scenarios (I could win the lottery!) than worst-case scenarios (A hurricane could destroy my neighborhood!). This is true not just of their approach to imagining the future, but of their memories as well: people are better able to describe the best moments of their lives than they are the worst. Though there are psychological reasons for this phenomenon, Karen A.Cerulo, in Never Saw It Coming, considers instead the role of society in fostering this attitude. What kinds of communities develop this pattern of thought, which do not, and what does that say about human ability to evaluate possible outcomes of decisions and events? Cerulo takes readers to diverse realms of experience, including intimate family relationships, key transitions in our lives, the places we work and play, and the boardrooms of organizations and bureaucracies. Using interviews, surveys, artistic and fictional accounts, media reports, historical data, and official records, she illuminates one of the most common, yet least studied, of human traits—a blatant disregard for worst-case scenarios. Never Saw It Coming, therefore, will be crucial to anyone who wants to understand human attempts to picture or plan the future. 

[beautifulpersonpeach]

BPP, sorry for spamming your inbox but pls answer just one question for me. Why would Hybe take out a loan to buy shares of SME if it was a good idea? Doesn’t this mean Hybe is struggling and SME is better and they have the upper hand?

**

Hi Anon,

Because leverage is typically cheaper than equity, especially if you’ve got the cashflow to service the loan. It costs next to nothing to use leverage when the alternative is diluting equity for your shareholders. HYBE would’ve been stupid to not use leverage since it’s essentially free money considering their working capital. Especially for shares in a company like SM where the value-add to HYBE is only incremental.

Like the fact is HYBE frankly does not need this SM deal to close (and you can clue this in from the structure of their financing deal), but the Kakao deal has 2nd and 3rd order implications that seriously compromise the integrity of the market.

Sigh, see this is exactly what I mean and why I say I do nothing here but laugh and listen to music. And the rest of what I say here is not to harp on you Anon, but your question is one I’ve seen in K-pop spaces of late and the reasonings of K-pop stans on this issue is so far out of step with reality I just have to unlook. Like I’ve said before, one thing you’ll quickly notice the more you spend time in k-pop spaces listening to k-pop stans, is that none of these people actually have any idea what they’re talking about.

For anybody who has been paying attention, SM has been in a bad way since at least 2019 when analysts started drawing attention to their skinny margins (bled down by Lee Sooman skimming off the topline and from settlement payouts due to several lawsuits (from idols and companies) and federal fines. The Korean government had pardoned Lee Sooman for his crimes in 2004 and since then levied fines instead.)

This is why when I’d see them mention HYBE’s financial statements or stock movements or routine audits, having zero idea of what the Big3’s look like, I just laugh and move on. And hard as it might be to believe, I’m not even a fan of HYBE, some of their decisions have earned an eyebrow raise from me, but the fact of the matter is no entertainment company on the KRX is better run than HYBE and that’s been true for at least 2 years now.

Like I’m trying extra hard right now to be just matter-of-fact in what I’m saying because I don’t want to unnecessarily offend SM stans who are already sensitive from this embarrassing turn of events.

A lot of k-pop stans are financial illiterates and that’s okay because it’s probably true most people in general don’t know how to do their taxes on their own nor went to business school, thats fine. But coupled with the hyper-competitive nature of k-pop and the irrational virulent animosity k-pop stans have to anything connected to HYBE, it makes them insanely easy to manipulate. And that’s what that video SM published by Chris Lee does.

Because, again, anybody who has actually seen the statements of both companies can pick apart that video in no time at all for its half-truths and obfuscations. The purpose of the video is to fear-monger and given Chris Lee’s track record, was expected. What investors actually care about is if the tender offer is attractively priced for the book value of the company plus its growth multiple - a multiple that has expanded across the entire industry since BTS blew up globally in 2018.

Anyway, I’ll drop the work speak and get back to listening to music. All of this is entertainment though my heart hurts for the artists torn over their devotion to LSM and what’s happening - the hold he has over these people is no joke, but it’s also been interesting seeing all the ways stans of SM groups are coping lol.

[prophet-one]

SVB bank failure

I comprehend the reason why SVB failed: its a classic bank run where the bank does not have the liquid assets to fund withdrawals. This the “other shoe dropping” wrt the rapid increase in interest rates.

what stands out to me are two questions: why do companies have that much cash in the bank? How did the financial markets in general fail?

The SVB failed because the financial markets are NOT working. The markets are not providing suitable securities for companies to park their excess cash. SVB was probably seen as a “safe” place to store cash. That assumption is obviously false. 

Question: why did the corporate depositors have so much money in cash accounts versus other securities?

Two months ago I was discussing cash management with my financial advisor. The key point he made about Bonds and funds that invest in bonds, is to use rolling maturity. The bond values will lag the market (especially with rapid changes in interest rates), but you wont lose principle. (BTW the change in bond values has to do with the liquidity price not the book value... if you hold bonds to maturity, then you dont lose value). So, back to the question about the depositors... when you have a billion plus of cash to invest you should be able to do something better than stash it in a low interest chequeing account. Something doesnt seem right about that.

Question: why do corporate depositors have so much cash on hand in the first place?

The financial markets “should” provide companies with cash “when and as” they need it through equity and bonds and loans. When a company like Roku has over a billion dollars sitting around “just in case they need it”, this is a clear sign that the financial markets are not working. Different sectors have different requirements for liquidity; but having 2 to 5 years of excess cash on hand is well beyond any reasonable requirement.

I completely understand that companies like the security blanket of having 2 or 3 or 10 years of cash sitting around. However, that is a total waste of shareholder resources, given that shareholders can make better investments with that cash. There is supposed to be a tax on capital to disincentivize hoarding... I guess that tax is not high enough.

When the regulators have time to get around to sifting through remains; I would like them to investigate these two questions: why are corporations not investing their excess cash appropriates? why do corporations have so much excess cash, why cant corporations raise the cash they need in an efficient manner? 

[notebooknebula]

Down Payment Options for Homebuyers

Watch The Full Interview:

"How Dads Achieve Financial & Time Freedom By Raising Private Money"

Adam Zach has a magnificent obsession with learning and is addicted to personal growth. He is a family man with a business, not a businessman with a family.

He retired from the Civil Engineering profession at age 32 by leveraging real estate investing. He currently holds 50 single-family rentals in 13 different states. Now his main passion is helping Dads with young kids who are into real estate achieve passive income while working a full-time job and putting family first.

At age 34, Adam lives in Fargo ND with his amazing wife and 3 young kids ages 5,3,&1.

Mission:

To help those who are unable to qualify for traditional bank financing achieve the American dream; home ownership.

Vision:

To be the go-to solution for people who do not qualify for a traditional home loan.

Adam Zach and Jon Enright are the creators of Home Equity Partner and provide a variety of custom housing options to future homeowners through a unique renting option.

At Home Equity Partner, they have developed a new tool that allows you to pick any home listed “for sale” and live in it. They specialize in Rent-to-Own, Lease Purchase Options, and Contract for Deeds and seek to help individuals and families gain homeownership to live the American Dream.

Home Equity Partner has recently been awarded the 2019 Greater Grand Forks Chambers Shark Tank winner, the 2019 Innovate ND Phase I and Phase II Program, and the 2020 DisruptWell winner with their innovation, scale, and solutions. They also work with real estate agents or bankers who have someone that does not qualify for a traditional bank loan.

Home Equity Partner also works with investors interested in supporting homeownership while making a modest return on their investment.

Private Money Academy Conference:

Free Report:

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Join the Private Money Academy: 

Have you read Jay’s new book: Where to Get The Money Now?

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Jay Conner is a proven real estate investment leader. He maximizes creative methods to buy and sell properties with profits averaging $67,000 per deal without using his own money or credit.

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[redvision-technologies]

Which is the No.1 Back Office Software for Mutual Fund Distributors in India?

Mutual Fund Distributors (MFDs) are often like a one-man army, they handle everything from client onboarding to managing investments, and even running their own business operations. But managing everything alone is not always easy. The demands on their time are immense, and they face several challenges that can limit their business growth. Here, we will explore the common challenges MFDs face and how the right back office software can help them overcome these hurdles, enabling them to focus on growing their business.

Challenges Faced by MFDs on a Daily Basis

Lack of Time

One of the biggest challenges MFDs face is the lack of time. With so many tasks to handle—client meetings, market analysis, report generation—MFDs find it hard to devote time to business growth strategies. Instead, they get caught up in day-to-day tasks that drain their energy and focus.

Stuck with Manual Paperwork

Many MFDs still rely on manual paperwork to manage their operations. This includes client onboarding, KYC processes, and managing investments. Manual paperwork is not only time-consuming but also prone to errors. It creates inefficiencies that slow down the entire business process.

Using Paper Trail Onboarding

While many industries have moved to digital solutions, some MFDs are still stuck using traditional paper-based onboarding processes. This takes more time and causes unnecessary delays.

How Does a Software Simplify Business for MFDs?

REDVision Technologies offers the best mutual fund software for distributors, which is the answer to many of the challenges MFDs face. Let's see how this software helps in making business easier for MFDs.

Key Features of Wealth Management Software for MFDs

● Goal-Based Planning

One of the most important features of wealth management software software is goal-based planning. This allows MFDs to work with clients to set and track their financial goals. Whether it’s retirement planning, education funds, or wealth creation, goal-based planning helps clients stay on track, while MFDs can easily monitor their progress.

● Multi-Asset Classes

Offering a range of asset classes, such as equities, mutual funds, IPOs, Loan against mutual funds etc, helps MFDs diversify their clients' investments. It enables MFDs to offer multiple asset classes, which helps them attract and retain more investors, and also beat competition in the industry.

● Client Reporting

Timely and accurate client reporting is essential to keep clients informed and engaged. The software lets MFDs share client reports through WhatsApp at their fingertips easily.

● Automated Alerts

MFDs can save immense time and effort by automating alerts for SIP dues, Fixed Deposit maturity, Life Insurance and General Insurance renewal, etc.

● Digital Onboarding

With digital onboarding, MFDs can speed up the process of bringing new clients on board, making them investment-ready in under 10 minutes.

● White Labeling

White labeling allows MFDs to brand the portfolio management software with their own logo, colours, and URL. This helps them stand out as a brand, where people can identify the logo, colours and the URL easily.

Conclusion

MFDs deal with many challenges that can slow down their work and limit their growth. They often spend too much time on tasks and use old, inefficient processes. But every manual effort needs to be replaced, and it needs to be done soon for business growth. Software is the best option for MFDs to automate their business at their fingertips.

[lendersainc]

Reverse Mortgages Explained: How They Work in 2024

As we age, many of us find ourselves with a valuable home but not enough cash to cover everyday expenses. A reverse mortgage can help. It allows homeowners, usually 62 or older, to tap into their home’s value without selling it.

What Is a Reverse Mortgage?

A reverse mortgage is a type of loan. Instead of making payments to a lender like with a regular mortgage, the lender pays you. You can get the money in different ways: a lump sum, monthly payments, or as a line of credit to use when you need it. The loan doesn't need to be paid back until you sell the home, move out, or pass away.

How Does a Reverse Mortgage Work in 2024?

In 2024, reverse mortgages still have some basic rules:

Age Requirement: You need to be 62 or older.

Home Ownership: You must own your home or have a lot of equity in it.

Primary Residence: The home has to be where you live most of the time.

Here’s how the process works step by step:

Counseling: You’ll first meet with a housing counselor who will explain the details, including costs and benefits, to make sure you understand everything. This step is required.

Application: After counseling, you can apply for the reverse mortgage with a lender.

Home Appraisal: Your home’s value will be checked through an appraisal. The more your home is worth and the older you are, the more money you may be able to borrow.

Getting Your Money: Once approved, you can choose how to receive the money. In 2024, the most common reverse mortgage is called a Home Equity Conversion Mortgage (HECM), which is insured by the government.

Repayment: You don’t make payments during the loan. It only needs to be repaid when you sell your home, move out permanently, or pass away. When that happens, the home is typically sold, and the money from the sale goes toward paying off the loan. If there’s extra money, it goes to you or your heirs. If the home is worth less than the loan, insurance will cover the difference, so your heirs won’t owe anything.

Pros and Cons of a Reverse Mortgage

Pros:

You get extra money without selling your home.

You don’t have to make monthly mortgage payments.

You stay in your home as long as you like.

Cons:

Interest builds up over time, which reduces the amount of money you (or your heirs) may get when the home is sold.

It might affect your eligibility for benefits like Medicaid.

It reduces the equity in your home, leaving less for your heirs.

Is a Reverse Mortgage Right for You?

Reverse mortgages can be helpful for older adults who plan to stay in their homes and need extra cash for living expenses or to pay off an existing mortgage. However, they come with costs and can eat up the equity in your home. Before deciding, it’s a good idea to talk to a financial advisor to make sure it’s the right choice for your situation.

Final Thoughts

In 2024, reverse mortgages remain a useful option for retirees needing extra cash. They allow you to access the value of your home without selling it, providing financial relief while you continue to live in your house. Just make sure to weigh the pros and cons carefully and seek expert advice to make an informed decision.

[todaynewsonline]

How Does a Home Equity Loan Work?

How Does a Home Equity Loan Work?

How Does a Home Equity Loan Work?:- If you are a homeowner and need a large sum of money to finance a home renovation project or cover unexpected expenses, a home equity loan may be an option for you. In this article, we will explain how a home equity loan works, including its benefits and drawbacks, and provide tips for deciding whether it’s the right financial solution for you. Table of…

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Find all the reverse mortgage information you need to understand what is a reverse mortgage and how senior's reverse mortgages work.

Visit: https://seniorsfirst.com.au/reverse-mortgage/how-does-a-reverse-mortgage-work/

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What Is a Reverse Mortgage, and How Does It Work?081

Reverse mortgage is a type of loan that permits homeowners aged 62 or older to borrow against a portion of their home's equity.

The functioning of a reverse mortgage differs from that of a traditional mortgage loan. Instead of the borrower making payments to the lender, the lender provides payments to the borrower. Read More

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Using a Home Equity Line of Credit for Emergency Expenses: Pros and Cons

When facing unexpected expenses, many people turn to a Home Equity Line of Credit (HELOC) as a financial solution. But how does it work, and what are its advantages and disadvantages? Let's break it down in an easy-to-understand way.

What is a HELOC?

A Home Equity Line of Credit (HELOC) is a type of loan where you use the equity in your home as collateral. Equity is the difference between the market value of your home and the amount you owe on your mortgage. With a HELOC, you can borrow up to a certain limit, typically based on a percentage of your home’s equity.

Pros of Using a HELOC for Emergency Expenses

Flexibility in Borrowing: Unlike traditional loans with fixed amounts, a HELOC allows you to borrow up to your credit limit as needed. This flexibility is useful if you’re not sure how much you’ll need for an emergency.

Lower Interest Rates: HELOCs usually have lower interest rates compared to credit cards or personal loans. This can make borrowing for emergencies more affordable in the long run.

Interest Only Payments: During the draw period (the time you can borrow from the HELOC), you may only need to make interest payments. This can help ease your budget during an emergency.

Tax Benefits: In some cases, the interest on a HELOC may be tax-deductible, especially if the funds are used for home improvements. Always check with a tax professional to understand how this applies to your situation.

Quick Access to Funds: Once approved, you can access the funds quickly, often through a checkbook or credit card linked to the HELOC. This can be crucial in a financial emergency.

Cons of Using a HELOC for Emergency Expenses

Risk of Foreclosure: Since your home is used as collateral, failing to repay the HELOC can put your property at risk. It’s essential to be confident in your ability to repay before using a HELOC.

Variable Interest Rates: Many HELOCs have variable interest rates, which means your payments can increase if interest rates go up. This can make budgeting more challenging.

Potential for Over-Borrowing: The flexibility of a HELOC might tempt you to borrow more than you need or can afford to repay, leading to potential financial strain.

Fees and Costs: There can be fees associated with opening and maintaining a HELOC, such as annual fees or costs for appraisals and closing. Be sure to understand these before proceeding.

Impact on Credit Score: Taking on additional debt, especially if not managed well, can affect your credit score. It’s important to use a HELOC responsibly to avoid negative impacts.

Conclusion

A HELOC can be a valuable tool for handling emergency expenses due to its flexibility and potentially lower interest rates. However, it also comes with risks, including the possibility of foreclosure and variable interest rates. Weigh these factors carefully and consider consulting with a financial advisor to ensure it’s the right choice for your situation.