If a messy garage is driving you crazy, here’s how to steer things back on course.
Let’s face it. For most of us, the garage serves as a dumping ground for old paint, broken toys, and boxes of clothes awaiting a ride to the local thrift store. No wonder our vehicles feel the squeeze—provided they can fit inside the garage at all.
If the thought of organizing your garage fills you with dread, take courage. Here’s how to break the task into three steps, so you can curb the chaos once and for all:
1. CLEAR THE CLUTTER. Begin with a serious cleaning, if possible hauling everything onto the driveway. Group items you’re eliminating into four piles: toss, recycle, donate or sell. “Be brutal when you are sorting,” advises Erin Gentry, Associate Public Relations and Consumer Engagement Manager at Rubbermaid. “Get rid of anything you haven’t used in the past year.” If parting with perfectly good items proves paralyzing, find motivation in a moneymaking garage sale or gain satisfaction from helping a favorite charity.
Here are additional sources to get you started:
• 1-800-GOT-JUNK: This national franchise will remove everything from appliances to tires to trash, donating and recycling whatever is possible. (Ask the hauler to obtain a tax receipt if you are donating to a charity.)
• earth911.org: Check here to find local recycling centers where you can safely dispose of paint and chemicals.
• donationtown.org: Use this site to match your items with a local charity and arrange pickup.
2. MAKE A PLAN. Now that the garage is empty, avoid the common mistake of hastily rushing out to buy organizational products. First consider whether the space could benefit from a fresh coat of paint. Then begin grouping items by task or interest. “Your pots, fertilizer, and garden hose should be grouped together for a gardening zone,” says Tim Keaton, Head of Brand and Product Marketing for Gladiator/GarageWorks. “And your golf clubs, soccer balls, and baseball bats should be kept together for a sporting zone.” Other logical zone groupings include holiday decorations, kids stuff, and a workshop area with space for a sturdy bench, plus pegboard or cabinets.
Once you’ve determined what zones you’ll need, work logically to fit them in where they’ll be easiest to access. For instance, it makes sense to keep garden equipment and the lawn mower by the door leading to the yard. Plan to store frequently used items close at hand. Stash seasonal items like holiday lights in higher, harder-to-reach spaces [such as using this overhead storage bin system – SA]:
3. CHOOSE TAILORED SOLUTIONS. Now that you have a plan, put it into action with smart organizational products that require minimal effort to use. The good news is there are plenty of options, from inexpensive DIY hooks and chrome racks to customized, professionally installed systems priced in the thousands. Here are key categories worth considering (and be sure to see the video at the end);
Wall systems, such as those from GarageTek, Rubbermaid, Schulte and Gladiator/GarageWorks, wrap any or all sides of your garage with panels that can be outfitted with your choice of accessories, including ball holders, bins, cabinets and hooks. Though some systems can be priced in the thousands, they do offer excellent flexibility and get everything organized and off the floor. Models that use tracks or rails are easiest to install.
Storage cabinets range from freestanding units to modular wall-hung models. Locked cabinets are ideal for storing toxic items, while tall cabinets make great use of vertical space. Look for the versatility of adjustable shelves to ensure you can store everything from camping gear to automotive parts.
Workbenches provide an ideal spot for home improvement projects, repairs, and woodworking. Models may be wood or steel and might include cabinets, lighting, or pegboard backs.
Racks help get all kinds of items off the floor. Specialty racks include space-saving corner models and overhead platforms that attach to the ceiling. The latter is ideal for holding memorabilia or off-season sports equipment.
Consider the following very helpful storage systems:
Shelves are among the most common and versatile storage solutions, providing “see, grab, and go” functionality that keeps frequently used items at the ready. Choose from metal, plastic, wire and wood models in freestanding or wall-mounted options. Invest in deep shelves for larger items like snow tires.
Hooks are easy to use and inexpensive, and in different sizes they are tremendously versatile. Small hooks can hang keys, twine, and hand tools, while larger hooks can get bikes, cords, and equipment off the ground.
Bins and tubs stash toys, holiday decorations, craft supplies and more. Choose stackable ones with lids to eliminate dust, and be sure to label each clearly to avoid having to dig around.
Perforated hardboard offers an easy DIY solution for hanging tools. Pre-drilled holes accept pegs or hooks. Look for options in wood fiber, wood, or metal.
Wall Solutions Pack A storage solution with built-in flexibility, this wall system includes eight pieces of GearTrack® Channels (more than 21′), assorted hooks and bins, plus a 2′ gearbox you can arrange any way you wish. Available at Gladiator GarageWorks, $429.99
Overhead Storage Rack This industrial-strength rack attaches to the ceiling, maximizing unused vertical space. Ideal for stashing off-season and other infrequently used items, the racks come in a range of sizes, from 2′ x 6′ to 4′ x 8′. Available at SafeRacks, $139-$269
Ceiling Bike Hoist Raise and store your bike, kayak, or extension ladder using the same principles you would to raise and lower a mini blind. The smooth pulley system has an automatic mechanism to prevent accidental release. Available from OrganizeIt.com, $34.99
The Bench Solution If you want a functional workspace but only have limited room, this wall-mounted workbench conveniently folds down when not in use. Measuring 60″ x 24″ on the surface, the solid butcher-block bench can hold up to 400 pounds. Available from BenchSolution.com, $399.99 for workbench and IdealWall kit.
Power Tool Holder A handy addition to Rubbermaid’s popular FastTrack storage system, this power tool holder gets bulky equipment off the floor. The soft grip coating protects stored items from scratches. Available from Rubbermaid, $10.99
Many thanks to Bob Vila, The Dean of Home Renovation & Repair Advice www.bobvila.com How to install the Rubbermaid Fast-track system (video):
Please take the time to read these tips. It could help save your life one day.
Help! Fire! The words terrify, particularly if you’re at home, and unprepared to put out a fire.
Sadly, the numbers add up: Last year, there were 370,000 home fires, causing $6.9 billion in property damage, according to the National Fire Protection Association.
Yet, it’s easy and inexpensive to follow safety measures to avoid the causes of most home fires. Fire Safety Week, which runs through Oct. 13, sends a loud message about the importance of understanding major causes, and heeding NFPA’s preventive measures:
MAJOR CAUSES OF HOME FIRES
Cooking fires. Kitchens are the hub of family life, with at-home cooking grabbing a starring role. Yet, it’s also the leading reason for home fires and injuries. The greatest number start when ingredients ignite (frying poses a particular risk), or a cook leaves a flame unattended.
To avoid a cooking fire: Avoid wearing loose-fitting clothing; keep the cooktop cleared of towels, papers or anything that can ignite; and stay in the kitchen when cooking. If you step away, turn off flames.
Never use water to extinguish a cooking oil fire. If a small grease fire develops, smother flames by sliding a lid over the pan, turn off the burner, and leave the lid on until the pan cools, suggests the NFPA. If an oven fire starts, turn off heat and keep the door closed. Never take unnecessary risks: If you’re ever in doubt, exit and call 911.
Home heating fires. Furnaces and space heaters help keep you toasty as temperatures dip, but they need an annual cleaning, according to NFPA.
NFPA suggests keeping anything that can burn at least three feet from equipment, and turning off space heaters (which account for one-third of home heating fires) when you leave a room.
Holiday fire safety risks. Holidays are festive, but not if you don’t make safety a guest. Take extra precautions around turkey day: Thanksgiving is actually the peak day for cooking fires, according to the NFPA!
The winter holidays also pose special concern: Remember to water a live Christmas tree and use nonflammable decorations, advises FEMA. And never leave a room with candles burning in a Hanukkah menorah. More tips? See this NFPA report.
FIRE SAFETY MEASURES FOR YOUR HOME
Beyond these basic preventative measures, you might also consider a three-pronged approach to fire safety:
Smoke detectors. Besides keeping smoke alarms in working order (test them monthly, and change out batteries twice a year), you need to install the right number: the NFPA advises having one outside separate sleeping areas and on every level. Alarms that flash or vibrate can be important if there’s a hearing-challenged member in the household.
Fire extinguishers. A fire extinguisher can be an important part of a fire safety kit, but you need to use the right tool for the job. It might be surprising to know that there are actually five distinct types of fire extinguishers—each designed to combat a different fire. Do a little research and outfit your home with the right extinguisher.
Automatic sprinkler systems. Common in office buildings, automatic sprinklers are increasingly being considered in private homes. They can be installed within the piping of new construction homes, but can also be retrofitted to fit in an existing home.
PRACTICE AN ESCAPE PLAN
Fires can quickly take a bad turn, spreading rapidly through your home. The NFPA says you may have as little as two minutes to escape your home safely once an alarm sounds.
Your best chance of getting out? It can depend on advance planning. So grab everyone in the household and develop a fire escape plan. Walk through your house and identify all possible escape routes (the NFPA even suggests having two ways out of every room) and choose a safe meeting point for your family outside the home. And, then, put the plan to the test. Try it out and practice it regularly.
Courtesy of Coldwell Banker Real Estate LLC Pauline Hammerbeck is a content editor for The Allstate Blog, which helps people prepare for the unpredictability of life.
I have multi surface types in my home which I noticed are getting somewhat dull. Because I’m not sure I remember how to clean each one properly, the following research came in handy for me… and it may also for you.
You’ve invested in your kitchen, bath or whole house remodel. Now the tough part of maintaining the new and sleek appearance of your home begins. Kitchen and bath designer Kayron Brewer shares an important reminder to everyone: Take care of your investment by using the proper cleaning methods and materials from day one. If you have a cleaning person to help you, “review your cleaning products and methods with them,” she says. “Don’t assume that they know the right cleaning method or product for a particular surface.”
Natural Quartz: Quartz is one of the hardest minerals found in nature, so it’s a fitting material for the busiest space in the home: the kitchen. Quartz countertops are made from crushed pure natural quartz combined with a small amount of pigment and resin. This combination of materials allows quartz to be a dense, nonporous stone that is both scratch and stain resistant with no sealing required.
However, says kitchen and bath designer Gary Lichlyter, “you really can’t tell the difference [in terms of surface gloss and sheen] between a sealed and nonsealed quartz countertop. [However] Sealing takes just a few minutes but can really help protect your quartz surface for long-term use, so I highly recommend it.” *
The most-simple maintenance regimen: Wash the surface with a soft cotton cloth and warm water with a mild dish soap. According to the company website, “Cambria is durable and more resistant to surface damage than other stone. However, all stone can be damaged by force and no stone is chip-proof. Objects hitting edges particularly at sinks or dishwashers may cause chips.”
Natural stone surfaces like quartz can also be damaged by sudden and rapid changes of temperature as well as direct contact with hot pots and pans. Always use a potholder to protect the natural quartz surface.
For tough stains: Quartz countertops are meant to be stain free, as the surface does not absorb liquids.
Stay away from: Bleach and abrasive products.
See below for more information on the care of quartz.
Travertine: The biggest issue people have with cleaning and maintaining a travertine shower is soap scum. Soap scum can damage tiles and ruin the look of a travertine shower. Also, hard water deposits can also start to accumulate in a travertine shower.
“A travertine-tiled shower is a constantly wet surface, so upon installation, I strongly urge people to apply the best sealer that money can buy to protect their travertine shower,” says Lichlyter.
For tough stains: Lichlyter recommends zero-pH cleaners, which are readily available in home improvement stores.
Stay away from: “Commercial cleaners that smell good but have petroleum in the ingredients,” says Lichlyter. “Petroleum sits on tile grout and causes residue and a dirty-looking appearance.” Also avoid acidic substances like vinegar as well as abrasive cleaners and dish soap containing citrus oil.
Porcelain Sinks: Kitchen and bath designer Angie Keyes‘ cleaning regimen for porcelain sinks is simple: She uses a Magic Eraser or a disinfecting bathroom cleaner like Comet, which comes in a nonabrasive, bleach-free liquid solution made for porcelain and ceramic surfaces.
For tough stains: Lichlyter recommends applying a bit of powder cleanser on the scuff marks and letting it sit for a few minutes before scrubbing the powder off with a scrub brush. Blogger Desireé swears by soft cleanser Bar Keepers Friend, which works without having to use bleach on the surface. “Apply a small amount [of Bar Keepers Friend] directly on the areas where you see stains. … You’ll see the stains disappear before your eyes.”
Stay away from: Bleach, which will eventually eat through the enamel seal on the porcelain.
Engineered Stone: Engineered stone countertops are made of 93 percent natural stone and 7 percent polymers and are highly resistant to scratches and stains. “Engineered stone countertops are highly resilient, but high temperatures will damage the polymers and can also damage your counters,” says Lichlyter. Use a hot-pot pad when placing heated objects on engineered stone surfaces.
For countertops with a smooth and matte look, use a mild soap and water solution to clean and polish the surface.
For tough stains: Multipurpose cleaners and detergents applied to scouring pads should take care of tough stains by transferring the dirt from the surface to the pad; the rough pad will not damage your countertop surface.
Stay away from: “Avoid using harsh chemicals like bleach or ammonia,” says Whitsunday Marble & Granite. “To clean engineered stone we recommend water and a mild detergent. Engineered stone is tough, but not indestructible.”
Clean slate tiles with a few drops of dishwashing liquid and warm water applied to the slate surface with a soft cleaning tool, like a mop, sponge or soft cloth.
For tough stains: Clean soap scum with a half-cup of ammonia per 1 gallon of water.
Stay away from: Abrasive cleaners, vinegar and citrus cleaners.
Granite: A surprising number of people still clean their granite countertops with a combination of vinegar and warm water. Houzz user Poorgirl said it best: “I would not recommend you use vinegar on your stone; it’s acidic and will eat your polished finish in time.” Natural stones like granite will require sealing upon installation, so it’s important to talk to your professional installer regarding their suggested sealer brands.
Designer Kayron Brewer adds, “Once the surface has been sealed, daily cleaning is as simple as mopping with straight warm water.”
For tough stains: For dirt and spills, use a stone-care cleanser that’s the correct pH with water. Don’t forget to read the cleanser label for the correct dilution ratios.
Stay away from: Bleach and acidic cleansers.
Soapstone: For a surface that’s soft and nonporous, soapstone is durable, won’t show stains because of its dark appearance, and is beloved by people who cook because the surface is an excellent heat insulator. According to AJD Interiors, soapstone, although more expensive, makes for a beautiful surface alternative to granite due to its silky look and appearance.
Soapstone upkeep is simple: Just wipe the surface with a soft sponge or cloth and a few drops of dishwashing liquid or all-purpose cleanser and warm water. During the first year of installation, it’s recommended that you rub the soapstone surface with mineral oil every couple of weeks to help the stone oxidize (darken) evenly; oil can be applied every two months after that for maintenance.
For tough stains: Soapstone resists water, chemicals and acids, so staining isn’t as problematic as scratches. Soapstone scratches and nicks can be removed with fine sandpaper.
Stay away from: Scouring and abrasive cleansers, because they will scratch the soapstone surface, and alkaline cleaners not specifically formulated for stone.
Marble: One of the most popular kitchen counter materials on Houzz is marble (particularly Carrera marble), but as interior designer Anne DeCocco says, marble is not for everybody. “[Marble] is a softer stone than granite, and it scratches and stains easily because of its porous nature. … But frankly, I like materials that age and show wear. If you don’t, then you are not a candidate for marble counters.”
Marble surfaces take some care and sealing, making them a challenge in homes with kids; acidic stains from breakfast staples like coffee and orange juice will be difficult to clean if not blotted up as soon as the spill occurs. Blot the spill or stain with a soft cloth or sponge and use water to rinse away any remaining spilled liquid. Rinse the soft cloth or sponge with hot water and wring it out thoroughly to remove most of the excess water, which can also seep through the porous marble and cause a permanent stain. Wipe the surface dry with a chamois; don’t allow it to air dry.
For tough stains: For any marble stain, it’s important to wipe the surface as soon as the spill happens. Ask your marble installer or home improvement specialist for a recommended marble poultice.
Stay away from: Abrasive cleansers, vinegar and citrus cleansers.
Ceramic: Before cleaning ceramic tiles, pick up loose dirt particles by sweeping or vacuuming prior to mopping. Use a soft bristle brush or vacuum floor attachment without a beater bar so the floor surface isn’t scratched by the wrong attachment.
After you remove the loose particles, the floor can be mopped with warm water. For tougher dirt and spills, mop with a neutral-pH cleaning solution. Many grout and sealant manufacturers have neutral-pH cleaning solutions made specifically for ceramic tile cleaning. Rinse the surface with warm water after cleaning.
For tough stains: Use a scraper to remove stubborn debris. A nylon scrubbing pad dampened with dishwashing liquid can be used to remove grout stains; apply grout sealer twice a year to prevent stains.
Stay away from: Bleach and other acidic cleansers, which discolor or fade grout joints over time. Also avoid oil soaps and ammonia, which will yellow grout, and vinegar, which will damage it.d warm water applied to the slate surface with a soft cleaning tool, like a mop, sponge or soft cloth.
For tough stains: Clean soap scum with a half-cup of ammonia per 1 gallon of water.
Stay away from: Abrasive cleaners, vinegar and citrus cleaners.Granite
Butcher block countertops are typically made of maple or oak and come in wide plank or narrow strips in terms of style. The wide plank style is more apt to warp.
Reapply mineral oil whenever the wood looks dry. You’ll want to use a generous amount of mineral oil — continue reapplying until you see the wood is no longer accepting any more oil.
Comments from readers: ‘Bar Keeper’s Friend’ is surface gentle and powerful on stains, soap scum, etc. I love it. It’s a great stainless steel and glass polish as well.
- Perform the paper towel test to determine whether your granite needs to be sealed. Some types of granite never need sealing and adding sealer to these types will just make a mess. [so, ask your designer/installer]
Soak a paper towel (without printing) or a white cotton towel. Place the water-soaked towel on the counter and wait about 5 minutes.
Is the area under the paper towel dark from the water soaking into the granite? If it is discolored, your granite needs to be sealed.
2 Spray the whole surface evenly with a spray cleaner. Wipe it down with a paper towel and wait a couple of minutes. The surface should be completely dry.
3 Uniformly apply the sealer to your counter top. This should be done using a spray bottle, but a clean white rag or a brush is also acceptable.
4 Let the sealer absorb into the stone for approximately 20 to 25 minutes.
5 When the sealer is almost dry, apply a little more sealer on your granite and then rub it in with a dry, clean rag.
6 Wait at least two hours and then apply a second application. The wait time depends on your specific brand of sealer.
Watch this How-to video: http://www.youtube.com/watch?feature=player_embedded&v=vhaF7NVISkA#!
How to Care for Quartz Countertops
Pass on sealing your quartz countertop. Because quartz is non-porous, it doesn’t need to be sealed or protected like granite or other natural stone countertops. It comes with a polished surface that acts a protective barrier.
Use hot pads or trivets when placing hot containers on a quartz countertop. While the countertops can handle moderate heat, prolonged heat can cause damage.
Clean the countertops with a non-abrasive kitchen cleaner. A vinegar and water solution or hot soapy water works best. If you’re looking for a more thorough cleaning, most cleaners sold on the shelves of supermarkets will work fine, but stay away from cleaners containing bleach. Always wipe off the countertops with a soft sponge or washcloth.
Prevent scratching the countertops by always using a cutting board when using a knife. Also, place glasses and bottles or cans of beverages on coasters. Another way to prevent scratching is to place all accessories or hairstyling equipment, bottles or lotions on a holding tray or shelf if you have quartz countertops in bathrooms.
Tips & Warnings: Quartz countertops are not as flexible as manufactured laminate. Prevent cracking or chipping by not allowing anyone to sit or stand on the countertops.
Thanks to: Houzz, EHow, WikiHow
Buying a home is one of the biggest investments you’ll ever make, so use our tips to make savvy financial decisions before you buy – and maintain your home’s value once you sign on the dotted line. The following is PART 1 of an excellent guide from FrontDoor:
PART 1: Financial Health and Recovery
The housing crisis has tightened up credit markets, so it’s more important than ever to have a clean credit report. Use our tips to shore up your credit score before you buy, or restore your credit after a major financial blow.
A. Recovering From Bankruptcy
What you can expect in the first 2 years after bankruptcy
Filing for bankruptcy should not be a financial monsoon that sweeps away your credit freedom for the rest of your life.
Bankruptcy can offer a fresh start to individuals with overwhelming debt who are seeking ways to brighten their financial horizon. But, improving your credit standing, like diminishing your credit standing, happens over a period of time.
While bankruptcy remains on credit reports for years, if you maintain a good credit history after filing for bankruptcy some lenders oftentimes extend credit for auto and home loans 18 to 24 months after a bankruptcy discharge.
In 2008, more than 1.1 million Americans filed for bankruptcy, a 32 percent increase from the year before, according to the Automated Access to Court Electronic Records. As the U.S. attempts to recover from an economic recession, a credit crunch has created a few hiccups as lenders tighten up credit standards for loan applicants across the board.
The turbulent markets could make the road to credit redemption a little longer, but don’t fret — instead focus on long-term financial freedom.
Know that every application for credit is judged on an individual basis, so the length of time it takes to repair your credit will vary.
What might your recovery period look like?
The First 6 Months
The most damage to your credit will be immediately after you file, says Candy Wright, group manager of counseling at GreenPath Debt Solutions (www.greenpath.com), a non-profit consumer-counseling service. “If you have accounts that you’re not including, like a mortgage, that will actually help your credit over time if you keep your account current.”
First, you should find an experienced and trustworthy lawyer who specializes in bankruptcy, or seek low-cost legal aid services.
Take the time to learn the difference between Chapter 7 and Chapter 13 bankruptcy and which works best for you. Under Chapter 7, also referred to as “liquidation bankruptcy,” you pay nothing to unsecured creditors, but may be required to liquidate non-exempt assets (like a house or car worth more than a certain amount). Chapter 13, often called a “wage-earner’s plan,” means you pay back a portion of your debts over a period of time and are not required to liquidate assets.
Next, be prepared to spend up to six months awaiting bankruptcy discharge, which releases the debtor from personal liability for some or all of his or her debts. During this time, creditors are notified and given time to respond to your bankruptcy claim. You should not pursue any new credit during this period.
6 Months to a Year
Your credit history won’t clear up immediately — even if you’re current on your bills, it will take several months for your credit to improve on paper.
“After six months to a year, if you’re in good standing, then you will establish a track record of turning yourself around that will be reflected in your score,” says Director of Consumer Education Steve Katz of TrueCredit (www.truecredit.com), a credit monitoring agency. “Keep in mind the impact of bankruptcy is a lot of late payments, and if you have a foreclosure you might still be accountable for that mortgage and those things can linger on for quite awhile.”
If you re-affirm debt, or agree to repay a portion of a debt, the positive effects of repayment will begin to show up on your credit report. If not, rental payments or other types of credit that are reported to credit bureaus may have a positive impact as you re-establish your credit.
The First Year
Request your credit report from all three credit bureaus after bankruptcy the first year and each subsequent year. As you begin to rebuild your credit, it’s important to track your credit history and remain in good standing.
“It’s kind of like your report card from school, so you want to try to always improve your score,” says Ralph R. Roberts, a bankruptcy and foreclosure expert and creator of KeepMyHouse.com. The way to improve: Pay on time, every time.
The Second Year and Beyond
Each year after the first has less of an impact on your credit history. However, bankruptcy will stay on your credit report for 10 years. For that period of time, any lender viewing your credit report will see an indication that you filed for bankruptcy and may take that into consideration before extending a line of credit. If you become more financially healthy in the seventh year, for example, it will have less of an impact than the 1st or 3rd year of bankruptcy.
Your credit requires a lifetime of maintenance, and while bankruptcy is a major roadblock, worry less about a timetable and more about weathering the financial storm by relying less on credit cards and survive by living a debt-free lifestyle.
NEXT: Part 1, Item B: 7 Ways to Improve your Credit Score
[“Reverse Mortgage” AKA “Home Equity Conversion Mortgages” HECMs]
Photo from Shutterstock FHA-insured reverse mortgages, also called home equity conversion mortgages, or HECMs, allow seniors to withdraw cash from their home while retaining the right to live there indefinitely. They are a potentially powerful tool for helping seniors live better lives during their retirement years, and new HECM options enlarge the possibilities.
However, the benefits can also be frittered away, with little lasting benefit to the senior, and all too many seniors are doing just that. About two-thirds of all HECM borrowers today withdraw the maximum amount of cash possible at closing, which leaves the senior with no borrowing power for the future. While some seniors have compelling reasons for withdrawing the maximum amount of cash at the outset, many are making a mistake.
HECMs are complicated
Underlying the mistakes that seniors make is the complexity of HECMs and the fact that few seniors understand them. The new options increase the complexity. While there is no way to make HECMs simpler, or to raise the IQs of senior borrowers, the likelihood of bad decisions can be reduced by improving the quality of advice that they receive, and the quality of the information to which they have access.
The role of counselors
Every HECM borrower must be counseled by a Department of Housing and Urban Development-approved HECM counselor, but counselors are not preventing borrowers from making serious mistakes. Even if counselors were financial planners qualified to advise seniors on how a HECM fits into a retirement plan, which most are not, under HUD rules, counselors are not supposed to recommend one HECM option over another. Many HECM borrowers, furthermore, turn off their hearing aids during their counseling session.
HUD limits the origination fees that borrowers can be charged to 2 percent of the first $200,000 of property value, plus 1 percent of the amount above $200,000 but with a cap of $6,000. In addition, lenders collect a premium paid by the wholesalers to whom they sell the HECMs. On the day in July that I checked, these premiums were 7.625 percent on fixed-rate standard HECMs, and 4.875 percent on standard adjustable-rate HECMs. Premiums are paid on the initial loan balance only.
Thus, a senior of 72 with a $400,000 home will generate premium income for the lender amounting to $20,600 if he draws maximum cash on a fixed-rate mortgage; $13,200 if he draws maximum cash on an adjustable-rate mortgage (ARM); and $600 if he elects an annuity on an ARM. In the last case, the initial loan upon which the premium is based consists only of the financed settlement costs. Note: The reasons for this enormous spread in originator income will be discussed in another article.
The bottom line is that lenders have a strong incentive to encourage borrowers to withdraw cash upfront. Unfortunately, in many cases, borrowers don’t need much if any encouragement.
Borrower bias against ARMs
Most senior homeowners had one or more forward mortgages during their life, from which experience many emerged with a bias against ARMs. They may not have had one, but they heard about them and knew that they were risky. So when offered a choice of fixed- or adjustable-rate HECMs, they opt for the fixed, which requires that the full value of the HECM be taken in cash.
Borrower bias against ARMs combined with lender financial interest in maximum cash withdrawals make for a perfect marriage. But not one made in heaven.
Borrower bias against HECM ARMs is misconceived. On forward mortgages, borrowers are exposed to the risk that a future interest rate increase will make the monthly payment unaffordable, but there is no such risk on a HECM because borrowers have no mortgage payment to make.
A future increase in the rate on a HECM does result in a more rapid increase in the senior’s loan balance, but this hurts only borrowers who use all or most of their borrowing power by drawing cash at the outset. To the extent that the senior reserves some part of his HECM borrowing power as an unused credit line, future ARM rate increases work to his benefit because the line grows at that rate.
The upshot is that seniors with needs best met by an annuity payment, and/or by husbanding a credit line for future use — which is most of them — should not shrink from taking an ARM.
Information available to borrowers
While HECMs are complicated, we live in an information age replete with sophisticated tools for expositing complicated ideas. Lucid exposition of the full implications of each possible course of action can overcome a borrower’s preconceived bias and the entreaties of interested loan originators.
The tools available to HECM borrowers, however, are a sorry lot. The existing calculators focus entirely on how much the borrower can draw, without any supporting information on the future consequences of a given selection. So I decided to develop my own. [end of Part 1]
- FHA Consumer Fact Sheet for Home Equity Conversion Mortgages (HECM) (reverse-your-mortgage.typepad.com)
One of the most important financial lessons that you can learn is that debt is prison. Indeed, when you are paying interest on your debt, that money is going straight into someone else’s bank account — and you receive nothing in return. Plus, paying that interest makes it harder to pay down the principal and to reduce your debt. Even though it might be difficult to get out of debt, it is doable. Here are the steps you can take to get out of debt.
1. Really Decide that You are Committed to Getting Out of Debt
The first thing you have to do is decide that you are really committed to getting out of debt. You need to truly want to change the way you do things, and get serious about paying down your debt and getting on the path to financial freedom. Without the commitment to get out of debt, you are likely to give up.
2. Stop Adding to Your Debt
Take a look at your budget, and figure out how you can better live within your means. Before you can effective tackle your debt problems, you need to stop making purchases with debt. Look at your spending, and cut back on the unnecessary items so that you are living within your means.
3. List all of Your Debts
Next, list all of your debts. List the balances, minimum payments and interest rates. Decide on an order to pay them off. Many people like the “debt snowball” method. You take that lowest balance debt, and concentrate on that first. This method is psychologically rewarding, since you see success faster, and are encouraged to keep going. Others, though, prefer to start with the debt with the highest interest rate, since it will save more money in the long run, since you will get rid of the most expensive debt faster.
4. Decide How Much You can Put Toward Debt Pay Down
Now that you have prioritized your debt list, it’s time to figure out how much money you can put toward your debt pay down. Honestly evaluate your spending, and look for places to cut back. You should be able to find waste in your spending, and, instead of spending it on frivolities, put it toward paying off your debt. Pay the current minimum on all of your debts, except the one at the top of your list. Put your debt pay down amount toward that debt. The more you can put toward it, the better.
5. Look for Ways to Earn More to Speed Up the Process
If you want to speed up your debt repayment process, you can look for ways to earn more money. Start a side hustle. Get a part-time job. It’s only for a little while. If you can put your debt repayment efforts into overdrive, you can be free that much sooner — and you will reap the benefits.
6. Acknowledge Your Successes
You can stay motivated when you acknowledge your successes and take time to reward yourself. Don’t go big though — you want to stay out of debt. But you can hold a little celebration, or you can retire each debt in a creative way. Buy a small treat, or cook your favorite dinner at home. Be sure to mark each milestone, and get excited about your next step toward success.