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We bought the last one for cash in the down market - figuring that if we ever had another need for the funds, we could always get a line of credit. We haven't needed it, but, the property has appreciated about 50-percent in the past 3+ years. We've got sufficient income and other equity investments, so property rounds-out the portfolio. (We've maintained high credit scores and could readily qualify for a mortgage; in fact, did so as an alternative to the cash purchase, but, decided to go the cash route).
IMO, in retirement, 'if one can afford to pay cash, then look at the benefits of a mortgage or cash purchase, but, lean toward cash. If you can't afford cash, then keep the mortgage small and avoid over-extending or stretching the budget to where an emergency could put your mortgage at risk.
We sold our house in VA last fall, and bought a home here in Maine. I contacted a couple of banks in Maine and pre-qualified for a mortgage. We had no problem in securing a 30-year mortgage, although since we make reduced payments every other week, if we actually pay this mortgage off "on -time", it will be less than 30 years.
I've never had enough cash to pay for a house, and never will. I worked for Uncle Sam for 34 years, and retired in 2008. Like the vast majority of federal workers, I sure didn't get rich.
We'll have a mortgage until its time to sell this house and move into assisted living. I'm kinda hoping that's waaaay off in the future.
You also need to look at your tax situation. If you have to use taxable funds to purchase the home, then the tax bite, could be substantial where a mortgage allows those funds to be disbursed over time and keep you in a lower tax bracket. I am facing the same decision and have decided that this is where a few dollars to an experienced tax accountant can be well spent money.
If your pension and annuity are sufficient that your mortgage+taxes+insurance will not exceed around 30% of your monthly income you should have no problem obtaining a mortgage (we didn't). You didn't state your age or tolerance for investment risk, but since your basic living expenses are covered by pension/annuity, I would think the difference between your mortgage interest (around 4%) and the income from your investments may represent some significant lost opportunity, given that this is money for wants and not needs. Equities average 10% annually over the long haul, but volatility is a problem if you are already older and can't ride out the lows.
Others will disagree...
If you consider that the broad market has been on balance going up since 1982 or 1974 depending upon whether you want to use the SP500 or Dow 30 low the odds of a major correction lasting a long time are increasing. I would prefer no mortgage or a smaller one.
We chose to pay cash for our condo(105K). It gives us peace of mind, and to be honest, didn't want the hassle of going through the loan process. Our income is so low we don't need a tax shelter. Yes, I know we could have taken a loan, and invested the 100K instead, but, we chose not to. We have no regrets.
Our accountant recommended a mortgage for our tax situation. We bought as a second home the year before retirement.
I can't imagine from a tax standpoint a situation that would be better where you spend 4 dollars or so over and above the home price to get back one. I can see it if you are an investor but not from a tax standpoint.
Did this accountant warn you under the revised tax laws turning a 2nd home in to a primary reduces the amount of your tax exclusion you get if you ever sell that other home ?
Buying a 2nd home in advance of making it a primary home causes a reduction in what you can keep tax free if that home is ever sold as they prorate it based on how long you owned the home over all vs it being a primary.
I have heard that even if you have an excellent credit score (800) that it is difficult to get a loan without being able to verify monthly income, so some folks have an issue getting a loan once retired.
I also have friends with both trains of thoughts, some feeling the need for "security" of having the home paid for, and others who feel they want to put as little as possible down and then make the minimum monthly payments because they "free up" their income and since the home will be inherited by the kids anyway, their position is "let them enjoy what they have as much as possible while here". I am not sure which method is best, and I feel it depends on personal needs, but I can see something that makes sense with either direction.
We did refi about 4 yrs ago to a 15 yr note to get ours paid off....and a great rate of 3.25%. We want it paid in full before DH retires, but that is just us. Guess to each their own. My goal is to get everything with higher rates (student loans for PhD) paid in full first for sure. While the house is a larger payment, 3.25% VS 6% student loan is a no brainer. No other bills except 1 new car note, and that is 1.65%, so student loans first.
The problem with getting a mortgage in retirement is that banks sell the mortgages. Depending on who they sell to the requirements for getting those loans vary.
If your non asset based income qualify's for a loan by itself you can go to any bank.
That means pension or social security or any other consistent source other than your investments.
If you are delaying ss like we are right now and don't have a big enough pension to take that 200-250k mortage you need a bank that sells to mortgage buyers who allow you to qualify under an asset depreciation formula.
They will take a certain percentage of your investments ,usually 40-60% , divide it by 360 and then see if you can qualify.
Not all banks allow asset depreciation to be used.
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