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Are you familiar with house flipping? A barrage of books, seminars, and TV shows are enticing people to get in on the action.

House flipping is an investment strategy where properties are purchased with the goal of reselling for a profit. This profit occurs either through a hot housing market or from renovations and improvements made prior to reselling.

In an article on December 28th at MarketWatch.com, Kirsten Grind reported that this is a great time to be in the house-flipping business. She states that the number of investors who flipped a house in the first nine months of 2016 reached the highest level since 2007. 

One third of those were financed by debt.

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We are two weeks into a new year. Are you discouraged by the state of your financial affairs?

ZeroHedge.com recently revealed the states where consumers accumulated the greatest revolving debt. Hopefully, you were not among those who woke up regretting the addition of thousands of dollars to your credit cards over the holidays (at a 30% interest rate nonetheless).

Minnesota and Wisconsin dominate the list of cities with the top 10 best credit scores, while cities in California, Texas, and Louisiana account for 8 out of 10 of the worst scores.

According to MarketWatch, the average family in the worst states would be required to apply 15% of their median income toward debt repayment and it will take them over a year and a half to pay off their credit card debt.

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The Good, The Bad and the Ugly of Reverse Mortgages

Originially posted on the Christian Post on September 30.

To learn Biblical answers to your financial questions, you can #AskChuck @AskCrown your questions by clicking here. Questions used may be lightly edited for length or clarity.

Dear Chuck,

My elderly parents are considering a reverse mortgage because they are struggling on a fixed income. Is that a good idea? Could it do more harm than good?

Worried for Mom and Dad

Dear Worried,

I share your concerns about reverse mortgages, called “the ugly stepchildren of the home-lending industry” by CNBC, and they may be right. I tend to agree with their analysis that “most financial advisors see the products as a last resort for cash-strapped seniors—and a bad one at that. They are expensive, restrictive and usually don't provide enough income to help borrowers meet their financial needs for very long.”

But still, it’s useful to consider what they are and how they work, as each person’s financial situation is a bit different. 

According to CNBC: “A reverse mortgage enables homeowners of at least 62 years of age to get a lump-sum payment, a stream of payments or a line of credit they can tap based on the amount of equity they have in the property. The amount someone can borrow depends on the value of the home (up to a maximum of $625,500), his or her age and prevailing interest rates. The higher the property value, the older the borrower and the lower the interest rate, the more people can borrow.”

The trouble is that once the equity in your house is gone, a valuable resource is depleted. It is always better to find other solutions to your financial needs, if possible. 

To find out where you may be able to reduce expenses and free up cash, start with building a functional budget. Crown has many resources and free tools to assist you.

After you have looked at all that is available to you, consider whether selling your home to go smaller might be a better way to free up cash without any obligations to a lender. And remember, if you take out a reverse mortgage, that doesn’t exempt you from your other responsibilities as a homeowner. You still must keep up the house, the property taxes and the homeowner’s insurance, and any failure to keep that current can lead to foreclosure. This is a big risk if you are already financially strapped.

The Consumer Financial Protection Bureau also notes: “Most reverse mortgages require you to pay insurance premiums. The insurance is there in case your loan balance grows to be more than your home is worth. With insurance, you won’t have to pay the difference. But, if you only stay in your home for a short period of time, chances are you are paying for insurance you don’t need. If you only plan to stay in your home for a short period of time, the loan balance is less likely to grow to more than your home value.”

Reverse mortgages often mean that your heirs don’t get the house or any resources at your death. While the borrower doesn't have to make payments on the loan, at the time of their death the loan is to be paid by the sale of the house, which means that your heirs or a surviving spouse (if they are not part of the loan) have to pay back the reverse mortgage or get out of the house.

If you don’t want to leave your home to others or are facing extreme health issues near the end of your life, perhaps a reverse mortgage gives you some financial flexibility. But as a tool for maintaining your retirement years, it is not a good idea. The interest rates are not always favorable, and you can outlive the value in your home.

For many retired people, changing your lifestyle is key to making resources last, especially without new money coming in, and that can require prayerfully considering what you really need versus what you want.  Philippians 4:11-13 advises, “I don’t say this out of need, for I have learned to be content in whatever circumstances I am. I know both how to have a little, and I know how to have a lot. In any and all circumstances I have learned the secret of being content—whether well fed or hungry, whether in abundance or in need. I am able to do all things through Him who strengthens me.”

To #Ask Chuck @AskCrown your own question, click here:

Chuck Bentley is the CEO of Crown, the largest Christian financial ministry in the world, founded by the late, Larry Burkett. He is an author, host of My MoneyLife, a daily radio feature, and a columnist for the Christian Post and a well-known speaker. Follow Crown @CrownUpdates For interviews or speaking requests contact [email protected]

 

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Is moving down the new moving up?

We have friends who are making radical home buying decisions. One sold their $800,000 home and purchased a $50,000 foreclosure. They plan to spend another $200,000 in repairs and improvements. Why? In order to get out from under the pressure of a mortgage. 

The other is selling their lovely home on acreage worth well over a million dollars. They are moving to a MUCH less expensive home on a city lot to intentionally minister among the needy.

Both choices are commendable. One realized they were over-housed. So, they put their home on the market, stepped out in faith, and purchased the foreclosure. To make their story even sweeter, the people buying their home recognized books in their library and rejoiced in purchasing the beautiful home from a brother in Christ.

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Are you among the over-housed in America?

Forbes contributor, Joshua Becker, asks, do you really need that much home? His insightful article points out that we regularly only use 40% of our living space. Yet, Americans carry high mortgages and live with the stress of financial burden. More is not always better.

A small home is typically less expensive, easier to maintain and faster to clean.

Peter Dunn, at USA Today, reports that Americans suffer from over-housing: the concept of paying too much money for housing in relation to one’s income. Homes are emotional possessions that affect family harmony.

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Homeowner Headache: Refinancing or Recasting at Mortgage?

Originally posted at Christian Post August 19, 2016.

To learn Biblical answers to your financial questions, you can ask Chuck your questions by clicking here. Questions used may be lightly edited for length or clarity.

Dear Chuck,

My husband and I own a home and are trying to decide if we should change our mortgage to get in better financial health. I read recently about “recasting” a mortgage, which sounds a lot like a fishing term! Is that something worth considering? We’ve been looking into refinancing. What is the difference?

Confused on Recasting

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Should you “re-cast” your mortgage?

Chuck Bentley on 6/29/16 8:00 AM

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I was recently asked if “re-casting” was better than “re-financing” a home mortgage. 

Let me explain the differences. 

Suppose you have $5,000 and want to apply it towards your mortgage.  A recast is when you use that money to reduce the unpaid principal balance of your loan and lower the monthly payment. In this case, your loan term and interest rate remain unchanged. However, re-amortizing the loan based on the newly reduced principal amount would result in a lower monthly payment. 

According to bankrate.com, “Typically, only fixed-rate loans can be recast, but adjustable-rate loans may be considered on a case-by-case basis."

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How Do I Collect an Unpaid Debt From A Fellow Christian?

Chuck Bentley on 12/17/15 7:00 AM

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According to a recent story in the NY Post, “When Sean Cooper paid off his mortgage in three years, he was so proud, he called in a TV crew to film him burning his mortgage papers.

As the Canadian resident explained (to CBC), Cooper managed to achieve the unbelievable feat simply by being frugal.

Cooper said he worked three jobs. He was employed fulltime at a pensions consulting firm while also working at a “no-frills” supermarket as a clerk and doing freelance writing on weekends and at night.

“So while people were out having a good time, I was usually inside on my computer working,” he said.

To cut costs further, he rented out his three-bedroom home and lived in the basement, riding his bike to work and eating “Kraft dinners” of macaroni and cheese.

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