Monthly Archives: June 2016

Know more about the mortgages

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CORRECTIONS AND CLARIFICATIONS: Originally, the article below stated, “Under the arrangement, investors offer homeowners annuity-type payments for their homes, in exchange for the title of the home after the owner dies.” But in reverse mortgages, a homeowner does not relinquish title to the home. In addition, a reverse mortgage becomes payable in circumstances other than the owner’s death. Changes have been made to paragraph four to reflect this change. It also stated, “Reverse mortgage homeowners are allowed to retain homeownership, with no mortgage payments.” But homeowners do not relinquish title of their homes, as the sentence implies. Changes have been made to paragraph seven. It also stated, “Through a HECM, you can buy your primary residence if you’re able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you’re buying.” Homeowners do not use reverse mortgages to finance the purchase of their primary residences, as the sentence implies. Changes have been made to paragraph eight. It also stated, “As for those costs, they can add up. Costs such as closing fees, lender fees, and insurance tend to be high for reverse mortgages. What’s more, they aren’t paid up front: they’re represented in the offer for a reverse mortgage as reduction in the net amount to which you’re entitled. Not surprisingly, many seniors are getting gouged.” But homeowners have the option of considering different lenders, and fees may vary. The U.S. Department of Housing and Urban Development regulates fees. In addition, homeowners are protected by mortgage insurance premiums. Changes were made to paragraphs 10 through 13.

It’s been a soul-degrading presidential election year, but it won’t end after Nov. 8. Expect to see at least a few failed politicians touting the benefits of reverse mortgages on late-night TV.

Under the arrangement, homeowners borrow against the value of their homes. The loan comes due when the home is sold or no longer used as a primary residence. It may also come due when homeowners don’t meet property or insurance payments.

Borrowers or their estates must not pay more than the loan balance or home’s value. A reverse mortgage can be a good financial decision in the right circumstances.

The home is still the biggest asset owned by most Americans. The Commission on Retirement Security and Personal Savings recently reported that there’s $12.5 trillion in home equity in the U.S. as compared to $14 trillion in retirement assets. It’s likely that retirees will increasingly tap their home equity to make ends meet.

Under a reverse mortgage, homeowners 62 and older leverage their home equity to extract cash from their homes without having to make a mortgage payment. Reverse mortgage lenders take over the payments and recoup their investment once the home is sold, typically after the homeowner or a surviving spouse moves out of the home or passes away.

Seniors rely on reverse mortgages to supplement Social Security and other existing income sources, cope with unexpected medical expenses, pay the college costs of grandchildren, take a long vacation, even purchase a new home. From an investment standpoint, the cash infusion of a reverse mortgage also can be used to buy stocks, bonds, mutual funds or insurance policies.

Homeowners never relinquish title to their homes. The reverse mortgage enables seniors with insufficient income to tap their home equity without selling their domicile. Moreover, the income can make it possible for a retiree to delay taking Social Security payments in favor of larger payments down the road.

Homes To Stay At During The National Parks Centennial

The National Parks Service turns 100 this year, but you don’t have to sleep on the ground to celebrate that fact.

Though Yellowstone and other national parks and monuments were established earlier and President Theodore Roosevelt and Sierra Club founder John Muir championed conservation well before, the National Parks Service’s establishment by President Woodrow Wilson on August 25, 1916, eventually preserved more than 450 sites for future generations. While the service is celebrating this year with commemorative coins, stamps and other detritus that grandparents will give to kids, the best way to take in the parks system is to visit on your own.

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Unfortunately, the timing of this anniversary isn’t great. By August 25, many college kids are back at school, already and many families have used up their vacation days visiting places that their tax dollars aren’t paying for and handing over exorbitant sums to visit attractions nowhere near as impressive as the Sawtooth Mountains or the view from Hurricane Ridge in the Olympics. The nation is just about burned out on vacations and ready for fall, school and football season.

It’s also a time when folks trying out camping for the first time have decided they either love it and want to spend more of their off hours sleeping beneath stars and canopies of trees, or absolutely hate it. They’ve been eaten alive by mosquitos, drenched in sweat after sleeping in tents-turned-greenhouses and have had just about enough of washing the scent of campfire out of their clothes each weekend. The latter group has decided that their favorite campsite is somewhere with air conditioning and their favorite tent is better known as a hotel.

These folks aren’t left out of the national parks experience entirely: they just need to be gently introduced to it. Fortunately the National Park System and its surrounding communities are dotted with surprisingly plush accommodations for a service built on roughing it. With help from TripAdvisor Vacation Rentals, we found five properties that allow travelers to celebrate the gift the nation was given 100 years ago, but still show an appreciation for more modern amenities like private showers, hot tubs and entrances that don’t open and close with a zipper…

The million-acre Glacier National Park along the Canadian border predates the National Parks Service by six years, but is one of its system’s crown jewels.

Bearhat Mountain reflecting into Hidden Lake, Grinnell Glacier still carving its way into the terrain, the surrounding mountains that dwarf you as you drive in on Going-To-The-Sun road: all of it remains impressive more than a century later. All of it is much easier to traverse on a good night’s sleep in a warm bed with clean clothing available.

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The cabins at The Ridge at Glacier were hand built by one man who had specific ideas about how Glacier should be enjoyed. In this case, it’s from an 880-square-foot, two-bedrooms, one bathroom cabin with room for six people, views of the ridgeline, a stackable washer-dryer and a full kitchen with full-size refrigerator, dishwasher, disposal, microwave, oven, stove top, spices and more. The guy behind this cabins roughed it so you wouldn’t have to. The least you can do is reward him for his efforts by taking a shower, warming up a Hot Pocket and sleeping in.

Yosemite dates back to a decree from Abraham Lincoln, but it didn’t come under full federal control until 1906. That’s still a decade before the National Parks Service was established, which means Yosemite has had time to acclimate to the needs of its visitors.

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This newly constructed three-bedroom, two-bathroom home, for example, sleeps ten within its surprisingly plush lodge surroundings. All the nature is safely behind large picture windows in the sprawling great room. You can take in the forest and mountain views from leather sofas around the stone fireplace, or you can ignore it altogether and watch preseason football on a 65-inch 4K television.

A kitchen filled with stainless steel appliances, granite counters and a “rustic” table for eight is straight out of an HGTV remodeling show, as are the king-sized bed, walk in closet and travertine shower in the master suite. There’s a queen-sized bed in the second bedroom and bunk beds and wall beds throughout the rest of the house. There’s even a loft with yet another 65-inch 4K TV, complete with satellite television and a Blu-ray player. A washer-dryer and a gas grill round out the perks and help make this cabin a nice little refuge when the Civil War-era landscape gets a little too rough for your liking.


All about the investments

One of the strongest sectors of the U.S. economy is housing, and the economy appears to be in the middle of an extended recovery. Investors can find many ways to participate in this trend, but one not frequently considered is timber real estate investment trusts.

Consolidation in the domestic lumber industry has led to a reduction in investment choices. The two you might want to consider are Weyerhaeuser  (WY)  andRayonier (RYN) .

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Weyerhaeuser is the behemoth in the sector. It has been around since 1900 and now owns or controls more than 13 million acres of forest lands. Weyerhaeuser shares have a market capitalization of $24.12 billion, following its acquisition of Plum Creek Timber in February 2016.

Rayonier is a smaller operator, with 2.7 million acres of working forests and a market capitalization of $3.39 billion. It has been around for 90 years.

It’s important for timber to be as close as possible to end markets and transportation. Both of these companies primarily produce lumber in the U.S., although Weyerhaeuser is also in Canada and Rayonier operates in New Zealand (close to China, a very important end market).

The beauty of timber as a resource is that it grows! Each and every year a tree enlarges its circumference. If sustainably harvested, timberlands can become an increasingly valuable commodity. Demand for pulpwood (converted into items such as paper towels and toilet paper) and logs (for lumber) rises and falls depending on economic conditions around the globe. Consider that China’s slowdown over the past couple of years reduced its need for imported logs, causing prices to weaken for exporters in New Zealand and the U.S. Pacific Northwest.

The current health of the housing industry seems to be setting up for better conditions domestically and potential improvement in China. Prices are gradually rising.

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When you own millions of acres of forest land, what do you also own? Real estate with the potential to be developed. Rayonier analyzes property in the southeastern U.S. for its greatest potential and highest business use. When it determines that forest land is valuable for residential, commercial or industrial use, it sells or develops the land for a higher profit. You can imagine that some lands in northeast Florida might be extremely valuable for development. This is another profit center for Rayonier. (And, as a company, it generates more than $500 million in revenue from only about 325 employees!)

What does it mean that these companies operate as REITs? As an investment vehicle, REITs were created by Congress in 1960 to allow investors to commit funds efficiently to income-producing real estate. REITs legally avoid paying federal income tax by distributing at least 90% of their taxable income to shareholders as dividends. (A portion of the payout may be classified as a return of capital, generating modest tax benefits and extra record-keeping for taxable investment accounts.)

Weyerhaueser and Rayonier are strong domestic operators with dividend yields in the 3.5% to 4% range. If you’re looking for solid investment income, likely asset growth and the potential for equity appreciation, you might want to take a chip out of these companies. After all, the housing industry likely will always need timber.