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Understanding The Pros and Cons of Reverse Mortgages

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Understanding The Pros and Cons of Reverse Mortgages

A reverse mortgage is entirely opposite to a home loan. You mortgage the house to the bank or a lender and in return get periodic payments. Eventually, the house is owned by a bank and they can sell it to recover the loan money along with the interest. It is for senior citizens, specifically for those who lack any constant stream of income. People over sixty are eligible for the reverse mortgage.

The ads given by reverse mortgage companies are very attractive. The ads show it as a means of great fortune. For several people, it is an excellent way of increasing their financial profile after retirement. It can have positive effects on their life quality. But it is important to look at both pros and cons of this mortgage before investing in it.

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Disadvantages of reverse mortgage:

Here are some of the drawbacks of this type of mortgage.

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  1. High fees: The upfront cost which includes insurance, closing and origination cost is very high. It is considered slightly greater than the cost that is charged for refinancing.
  2. Accumulating interests: There are no monthly payments in it, so the amount that you have to pay eventually increases. It grows over the time. With each passing month, the amount of interest increases.
  3. Not enough money to tap in: If there is a lot of home equity, it does not mean that you can use all of it. The reverse mortgage only allows you to use a limited sum of that money. The actual loan payment is calculated by using the appraised value of the home, the amount you owe on the home, current interest rates, and age.
  4. Complicated procedure: It is a mortgage, but in reverse. Some people find it difficult to understand the concept. In the traditional mortgage, money is borrowed up front and loan is paid back in installments over a period of time. It is just the opposite of that. You collect credit over time, and you pay it all back when you leave the house. Any equity that remains at the time of ownership is given to the heirs. Several people find the process complicated and difficult to understand.

Advantages of reverse mortgage:

The biggest benefit of this mortgage is that it saves you the trouble of paying traditional mortgage payments. It also eliminates the access to equity while you are still living in the house. If the circumstances are ideal, then it can the best way of earning financial security and increasing the power of spending.

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The main benefits of this type of mortgage are:

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  1. Flexibility: It is highly flexible and can be utilized in several different ways. Its versatility makes it perfect for various types of borrowers. A household which is in need of finances can use the product to decrease their financial stress. Households which have stable finances can use it as a tool for future financial planning.
  2. Improving finances while staying home: The best thing about it is that it allows you to stay in your home for as long as you want. You can live in your house without making any monthly mortgage payments. You can also access a particular amount of money in case of any financial emergency. The lenders do not have any claim on your assets or income in this mortgage.
  3. No downside: With this mortgage you will only owe according to the value of your house at the time loan is paid. It is an enormous advantage because you will get the amount of money according to the value of a home that time, even if the value of the house drops afterward. This feature offers excellent financial security.
  4. Flexibility in options for payment: The options of payment depend on the type of loan you choose. You can receive the loan money in the credit line, annuity, lump sum or a combination of these three options.

Featured photo credit: www.kiplinger.com via kiplinger.com

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Last Updated on January 27, 2022

5 Most Affordable Australian Cities For Students

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5 Most Affordable Australian Cities For Students

With high standards of education, a multicultural community, and laid-back lifestyle, it’s not hard to see why so many students love Australia. However, one thing Australia is also known for is being the world’s most expensive country to study in as a foreign student.

For those willing to look beyond popular cities like Sydney or Melbourne, however, study abroad doesn’t have to be unaffordable. Check out these five more economical cities that still make for great student living.

1. Gold Coast

If you’re looking for a more affordable place to buckle down and study while still enjoying glorious beaches and a vibrant nightlife, the Gold Coast is an excellent choice. While it has no shortage of restaurants, cafes, bars, and natural attractions, the city is also well-known for its quality of education.

Gold Coast is home to Bond University, which has Australia’s highest rating for overall graduate satisfaction, but also some of the country’s highest tuition fees. Fortunately, it hosts campuses for Griffith University and South Cross University as well, both of which have affordable options for international students.

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When it comes to off-campus accommodation, there are plenty of choices, from shared housing to homestays. Real estate sites like Flatmates can be useful for finding options within your budget.

2. Wollongong

Wollongong’s close proximity to Sydney (80 km) makes it a popular choice for students who can’t afford the high cost of living in Australia’s largest city, but still want to experience all that it has to offer. Wollongong itself is a lively city as well, and is rated as the country’s most livable small city thanks to its gorgeous beaches and lively city centre.

The University of Wollongong is one of Australia’s top universities, with a comprehensive academic program, international research reputation, and high graduate employment rates.

Due to a lack of on-campus parking, most students prefer to walk, cycle, or use the free bus service that operates between the university and city centre. Living costs are quite reasonable in Wollongong, and sites like Gumtree can come in handy if you’re looking to split housing costs or even score some second-hand furniture on arrival.

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3. Hobart

Hobart is the capital of Tasmania, the second oldest city in Australia, and also the cheapest city for university students to live in. While it might not be as happening as cities like Gold Coast or Brisbane, its striking natural beauty and slower pace of life make it a great place to block out distractions and focus on studying.

The Hobart Universities sector is based on a single institution, the University of Tasmania, which is consistently rated among the top ten universities in Australia and has a large population of students from abroad, with more than one in five students being international.

Although public transport in Hobart isn’t as convenient as could be, there is plenty of student accommodation available to make up for it. Students often live in shared houses near the university so they can simply walk to class. If you’re looking to rent a shared house or room in the area, Easy Roommate can be a good place to start your search.

4. Adelaide

Of Australia’s major cities, Adelaide is the cheapest to live in. That, along with its spacious layout, clean and green atmosphere, and beachside attractions make it a great place to live and study. It’s also regarded as the food and wine capital of Australia.

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Adelaide has three universities, including the University of Adelaide, which is ranked in the top 1% of universities worldwide; the University of South Australia; and Flinders University. Its integrated bus, train, and tram transportation system connect all parts of the city and make it easy for students to get around.

Naturally, the cost of accommodation is lower outside the city centre, and depending on which university you’re studying with, the outer suburbs could be more convenient as well. Check Study Adelaide for information on a range of student accommodation options, from independent living to homestays.

5.  Brisbane

Brisbane is the capital of Queensland and Australia’s third largest city. Unlike Sydney and Melbourne, it’s known for being one of the most affordable cities in Australia, which makes it a good choice for students. It’s also known for its pleasant subtropical climate and wide range of entertainment options.

Brisbane has three major universities: the Queensland University of Technology, the University of Queensland, and Griffith University (which accepts the most study abroad undergraduates). The inner city is well-connected by public transportation, although cycling is popular as well, and there are plenty of cycle paths that make it easy for students to get around this way.

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Students typically live in and around the inner suburbs, where the bulk of Brisbane’s teaching facilities are located. If you’re looking for convenient accommodation off-campus, you can check sites like Urbanest or The Pad.

Featured photo credit: Bhavesh Patel via unsplash.com

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