Can We Use Home To Partially Finance (loan, property tax, credit card)

[wayneswife]

We found a place we want to retire to in the next 5 years.It's in another state near my husbands family.We were originally looking at land only,but found land with a nice house and buildings(farm).It's double of what we originally planned on spending for land because of house.I just payed off credit cards to lower debt to income ratio.Our combined income is half the asking price and my husbands credit score is good/excellent.All we owe now is $4000 on our present mortgage,$7000 on RV and co signed for a vehicle $6000.I'm thinking of paying off RV.But that will leave us with little down payment left. Is it legal or possible to get a loan on our current home,and a loan on other property like a 50/50 split.Or are we just going to have to build up our savings again and try and find something else if this sells.
P.S. We're in Indiana.There are property tax benefits to having a mortgage on house ,that's why we weren't going to pay off unless we got other place.
Thanks

[chet everett]

First, what sorts of tax benefits do you think there are on mortgage? The interest deduction is probably less than your personal exemption if you only owe $4000. Pay the thing off and you have a world of flexibility open up.

Second, what sort of VALUE are talking about of your current home vs the retirement property? Is there sufficient equity in your current home to FULLY pay for the rural land and buildings? If yes the transaction you would do is to refi current home to own retirement free & clear. Easy as pie, as long as INCOME is sufficient to cover the loan. When you sell current home you would then be DEBT FREE.

Great place to be in retirement.

[wayneswife]

Tax benefits- Our property tax bill is reduced by half as long as there is a mortgage.
Value- Home would cover 2/3 of cost.Also have 10+ acres separate deed adjoining property.Would cover full cost ++.
Income- I don't want to list specifics cause I'm paranoid about identity theft.But the mortgage underwriter site calculator says we can afford over $100,000 more than this whole thing would cost and $1200 more per month than what the financing would amount to.
So the lender will be more favorable with the mortgage paid instead of we'll pay it when we refinance and just take a hit in proerty taxes for a little while is what your saying.Our plan is to be debt free in retirement,it's a juggling act though to have a place bought,sell this place,and all in another state. When it's all said and done we will be debt free or we don't retire until we are. You're very helpful thank you.

[chet everett]

I think you may be misreading the Indiana property tax exemptions for mortgaged property. It is the LESSER of $3,000 or the amount of the mortgage or 1/2 the property value. Hopefully you won't see you bill increase much at all: http://www.in.gov/icpr/webfile/formsdiv/51781.pdf

I think you are on the right track. Pay off your current house. Decide whether you are going to do better with financing the new home out of the proceeds of the home equity loan / new first mortgage or other instruments. I would focus on mid sized banks where you could explain your longer term plans. Your situation is NOT the typical "let me borrow a ton of money for something crazy" but neither is it unheard of -- lots of people have paid of principal residences and then decide that they want to buy a potential retirement /vacation home. Lots of different ways to finance it, especially as you have good income and assets.

Good Luck!