Mortgage in Retirement (states, trouble, senior, costs)
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I haven't found any problems with borrowing after retirement. When we wanted a mortgage for our home here in Tennessee, we had been retired about 3 years. My wife was drawing her social security and I was getting spousal, so our income was not very high. I set up automatic withdrawals from our IRAs for four months before we applied for the mortgage. Walked into a local bank here with tax returns, social security info, brokerage account/bank account statements and an hour or so later were on our way to lunch with the loan. Waited three months after we moved here and then cancelled the automatic withdrawals from the IRAs.
No problem either in borrowing for a new roof that we put on in April. Borrowed on a credit card at an attractive rate for that. Seems like is always money available to loan to retired folks, depending on cash flow, assets and credit report.
Five years ago, I took out a mortgage of over $300K after I had been retired for several years and was 67. I did have to start taking SS in order to qualify. Otherwise, I had investments but no income. I was happy to have the mortgage approval because the cost of the loan is lower than the return on my investments.
Be careful about getting a Heloc. When my sister's husband died, the bank wanted the Heloc paid off at a very accelerated rate. My sister had to sell the house.
You are mistaken, the home equity line would be tax deductible in this case.
That's correct. As long as the HELOC is used to substantially improve one's home, the interest is fully deductible. Here's the language direct from the horse's (or in this case, the IRS's) mouth:
Responding to many questions received from taxpayers and tax professionals, the IRS said that despite newly-enacted restrictions on home mortgages, taxpayers can often still deduct interest on a home equity loan, home equity line of credit (HELOC) or second mortgage, regardless of how the loan is labelled. The Tax Cuts and Jobs Act of 2017, enacted Dec. 22, suspends from 2018 until 2026 the deduction for interest paid on home equity loans and lines of credit, unless they are used to buy, build or substantially improve the taxpayer’s home that secures the loan.
I love my old house (96 years old) but it needs some work. I'll need a new roof, chimney repair, and misc repairs if I want to sell for top dollar in a few years. Hubs and I would rather take a mortage than pull out money from our retirement accounts. Is it possible to get a loan once retired or should we apply while he's still working? Since home equity lines are no longer tax deductible we don't want to go that route. And also, if we choose to sell as is and move elsewhere the same question is there. Is it possible for someone retired to get a home loan? Thanks!
I love my old house (96 years old) but it needs some work. I'll need a new roof, chimney repair, and misc repairs if I want to sell for top dollar in a few years. Hubs and I would rather take a mortage than pull out money from our retirement accounts. Is it possible to get a loan once retired or should we apply while he's still working? Since home equity lines are no longer tax deductible we don't want to go that route. And also, if we choose to sell as is and move elsewhere the same question is there. Is it possible for someone retired to get a home loan? Thanks!
I would be very careful if you are considering spending a great deal of money to upgrade a 96 year old home with the goal of that endeavor being getting you top dollar when you plan to sell. And I say this for a couple of reasons. Many people that are in the market for homes of the era of yours know they will likely need renovations and this is something they enjoy doing, and these homes are a blank canvas for them to do their own renovations and make your home home their home. And the things you think are dated in your home like maybe your bathroom tile and you can't wait to rip out thinking replacing them will add to your home's value, some of these people love these old tiles and leaving them intact may add to the value more than replacing them.
When my sister and I sold our parents 1950's minimally renovated home several years back following the death of our Dad, with our parents having done only a couple of years prior to their death's putting in new replacement windows, roof, and carpets we essentially did nothing else except a little painting here and there prior to listing it. The interior we could have filmed Ozzie & Harriet episodes in the house because that is how dated it was, but our relator said do nothing more than the minimal we did because many people were looking for homes with that 1950s character. Our relator was right and right off the bat we got 2 full price offers, and one above full price from the woman we sold the house to. She was ticked pink that we did no major renovations because she wanted to do her own in keeping with the character of the home, and she absolutely loved those 1950s bathroom and kitchen tiles and she planned to have them painted black and white which I did not know painting tile could be done. Although the carpet was new, the new owner immediately ripped it all out because there were beautiful great condition hardwood floors underneath since they had been covered for nearly 40 years with carpet.
People who are going to pay top dollar for a home want things that are in their style preference and not yours, so even if you spent $50,000 to renovate your kitchen for example, if that new kitchen is not in the style preference of a potential buyer they are going to walk away because they are not going to refund your kitchen renovation costs just to rip out the kitchen and then pay on top of that another $50,000 to put in a kitchen that is in their style.
I say put the new roof on, replace the windows if they really need it, update electrical and plumbing that needs it, paint the walls a neutral color, have any hardwoods sanded and refinished, and professionally have all the carpets cleaned because those are the things that will add value to your home. And if you list at fair market value of the homes in your neighborhood you will likely get your asking price and possibly a little above that. And any good relator will tell you if you have a home with minimal renovations in a neighborhood with similar homes and all are valued for example $200,000 even if you put in $150,000 in renovations you will not be able to sell your house for $350,000+ but more likely in the $250,000 range which would reflect the cost of the necessary renovations like roofs and windows because those are the things that matter to buyers and not the esthetic renovations.
Have you thought about having a chat with your banker? My credit union is always happy to talk with customers. They are in the business of lending money, and know exactly what it takes to qualify for a loan. They particularly like to talk to people who move deliberately and plan their financial situation well in advance. That places you firmly in the GOOD customer file. Take a copy of your credit score with you. If you actually apply for a loan they will run your credit, but for ballpark discussions an approximation will work fine.
Deductible home loans never meant much to most people anyway, unless you have a pile of other deductions. However, you might ask the loan officer how to document the loan so it is deductible. Interest that goes to home improvements is still deductible, but if you spend the money on a new fishing boat, it's not.
Of course you can get a mortgage in retirement if you can prove a monthly income sufficient to meet the debt to income ratio. We have pensions and it was exactly the same as getting a mortgage while working. Instead of paystubs, we had to show our pension letters, and 3 months bank statements, as well as 2 years of tax returns.
I got a mortgage last year at 62 when I hadn't been at my job long enough for the mortgage company to consider it as part of my income. However I have SSDI, late hubby's pension and DFAS and I just had to show proof of that income.
I would be very careful if you are considering spending a great deal of money to upgrade a 96 year old home with the goal of that endeavor being getting you top dollar when you plan to sell. And I say this for a couple of reasons. Many people that are in the market for homes of the era of yours know they will likely need renovations and this is something they enjoy doing, and these homes are a blank canvas for them to do their own renovations and make your home home their home. And the things you think are dated in your home like maybe your bathroom tile and you can't wait to rip out thinking replacing them will add to your home's value, some of these people love these old tiles and leaving them intact may add to the value more than replacing them.
When my sister and I sold our parents 1950's minimally renovated home several years back following the death of our Dad, with our parents having done only a couple of years prior to their death's putting in new replacement windows, roof, and carpets we essentially did nothing else except a little painting here and there prior to listing it. The interior we could have filmed Ozzie & Harriet episodes in the house because that is how dated it was, but our relator said do nothing more than the minimal we did because many people were looking for homes with that 1950s character. Our relator was right and right off the bat we got 2 full price offers, and one above full price from the woman we sold the house to. She was ticked pink that we did no major renovations because she wanted to do her own in keeping with the character of the home, and she absolutely loved those 1950s bathroom and kitchen tiles and she planned to have them painted black and white which I did not know painting tile could be done. Although the carpet was new, the new owner immediately ripped it all out because there were beautiful great condition hardwood floors underneath since they had been covered for nearly 40 years with carpet.
People who are going to pay top dollar for a home want things that are in their style preference and not yours, so even if you spent $50,000 to renovate your kitchen for example, if that new kitchen is not in the style preference of a potential buyer they are going to walk away because they are not going to refund your kitchen renovation costs just to rip out the kitchen and then pay on top of that another $50,000 to put in a kitchen that is in their style.
I say put the new roof on, replace the windows if they really need it, update electrical and plumbing that needs it, paint the walls a neutral color, have any hardwoods sanded and refinished, and professionally have all the carpets cleaned because those are the things that will add value to your home. And if you list at fair market value of the homes in your neighborhood you will likely get your asking price and possibly a little above that. And any good relator will tell you if you have a home with minimal renovations in a neighborhood with similar homes and all are valued for example $200,000 even if you put in $150,000 in renovations you will not be able to sell your house for $350,000+ but more likely in the $250,000 range which would reflect the cost of the necessary renovations like roofs and windows because those are the things that matter to buyers and not the esthetic renovations.
Often times, it's better to make minimal repairs as needed to sell the house because you'll go through all the trouble of renovating and making improvements that aren't appreciated and don't increase the value of your home to cover your expenses in making those renovations.
I can't see making $100,000 of improvements on a house that sells for $300,000 with those improvements and probably would have sold for $275,000 without them.
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