I know while the ads have definitely slowed down a bit, there are still many out there that advertise reverse mortgages. So what exactly is a reverse mortgage and is it the right choice for you?

First of all, a reverse mortgage is loan that is available to those who are above the age of 62 (if the borrower has a spouse, the bank will go by the age of the youngest spouse) that releases the home’s equity to the owners in payments or a lump sum. So, as it is called a “reverse mortgage” things are a bit reversed because the lender pays the borrower money rather than the other way in a traditional mortgage. In the case of a reverse mortgage, the homeowner is not obligated to pay the balance until the home sells or the owner passes away.

The people who decide to do a reverse mortgage do not have to sell their home (saying a homeowner is selling their home to the bank for a reverse mortgage is a common misconception), they do not have to give up the title to their home, and they do not have an additional mortgage payment (that would be a home equity line of credit).

A credit line from a reverse mortgage can be used for anything, but considering the age of the owners, it is typically used to fund retirement and expenses associated with retiring couples.

You may be wondering how exactly the interest rate works in a reverse mortgage. After I looked into it seems as though you are charged interest on the proceeds that you get from the reverse mortgage. However, you can get a low fixed rate (this is new however, most banks charge a variable rate). The rate is tied to indexes and do move as they move. However, the most typical one to track is the 1 year T-bill.

Reverse mortgages may be right for you if you need the money for retirement or anything really. However it is important to remember that it is a debt that must be paid back when the house sells (or, as I understand it, the owner moves out into a retirement community). Having the equity in your home can make a difference on the quality of living though. If you think that a reverse mortgage can benefit you, call or go into your local bank to find out more specifics about the process.

Starting as small business can be difficult and time consuming. Here are a few tips to help the process go smoother:

Save up as much money as possible before starting.

It is too often that people go into a business without any form of savings and only borrow money from banks, friends, and the small business association. No business needs to start out in debt. Many think that they can just simply start a business and begin making money, but it usually takes months or years to actually profit from a business. The last thing that you want to do is take out a home equity line of credit to fund your business because that is the best way to lose your house if things were to go south for your business.

Start on a shoestring.

Start small. You shouldn’t just rent a building or office space to work at and begin hiring employees. If you look at the first tip and have already made that mistake, then don’t make this one. You can only have employees once you have enough work to keep them business. Some people who start their businesses small start in their homes. Many even take losses on what they pay themselves to get the business off the ground.

Protect your personal assets.

You have to be able to protect whats yours when it come to your business. When you start your own business, you become liable for all the debts that your business incurs, including loans, money owed to suppliers, taxes, etc. The problem is, if you aren’t careful and don’t protect yourself, a creditor may be able to come after you and your personal assets.

The best way to protect yourself, especially if you plan on running up big debts, is to form a corporation or a limited liability company. It isn’t much more difficult than forming any kind of sole proprietorship and protects your personal assets.

Make a business plan, no matter how short.

You need to be able to have a long term business plan, you really need to know where the business is going and how it plans to get there, at least how it does it in your mind. You can obviously tinker around with your business idea every now and again, especially when the environment changes or you begin making or losing money, but the core business plan should be there…in writing…from the start.

Get and keep a competitive edge.

I think that if you have a great product, then with a bit of marketing and money behind it, people will buy it. However, if your product or service isn’t competitive, it will be very hard to play “catch-up” with the players already in the field. I call this a “chase” strategy in marketing and it doesn’t often end too well. You really need to have that competitive edge against those who are entering the market or are already in the market if you want to succeed.