Mortgage on retirement home (55, pension, beach, financial advisor)
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A question for many thinking in retirement soon. With interest loans going so low how many of you Would get a mortgage and let the balance in your investments as opposed to paying house completely.
Let’s assume you have 350k to buy a house with no mortgage or take mortgage and let most of that money in investments
Option #1 Pay for house completely- no mortgage
Option #2. Carry a mortgage and invest the money
This is of course assuming you can carry mortgage payments with retirement income
A question for many thinking in retirement soon. With interest loans going so low how many of you Would get a mortgage and let the balance in your investments as opposed to paying house completely.
Let’s assume you have 350k to buy a house with no mortgage or take mortgage and let most of that money in investments
Option #1 Pay for house completely- no mortgage
Option #2. Carry a mortgage and invest the money
We had similar when we retired and transplanted. I would say you should consider what other liquid assets you have other than home equity and what is your monthly fixed income flow.
Paying cash hits liquid assets and protects fixed income.
Look at it over the long term and ten years out plus, plus. What are your projected monthly expenses after housing going to be and what will your liquid asset funds project out to.
For us it was comparable to when to take SS and having to prioritize asset v income needs/wants.
It is based on your personal variables and long term goals.
I did not vote as I do not know enough to suggest. That said, I would lean toward a mortgage if I knew my income was sufficient and solid enough to handle the mortgage. Invest the rest.
My fee-only financial advisor strongly advised me to carry a mortgage in retirement and let the 403(b) funds be. (I was earning much more in my accounts than the rate of mortgage loans.) However, because I told my employer that I was going to retire, the mortgage loan people would not use my income to qualify for a new mortgage, even though the loan payment would be low and easy to carry on my retirement income. As a result, I had to raid my retirement fund to purchase the new retirement house.
My advice to those retiring soon and seeking a new mortgage . . . qualify for the mortgage BEFORE you tell your employer that you are going to retire.
Well, if you take on a mortgage, that's fixed overhead. No matter what may happen with those investments, that mortgage payment will be due every month, like clockwork. If you get old enough, you won't be able to take on a job to add to income. So you're basically going to place your home at the mercy of the stock market (for investments in equity) and inflation (for fixed income investments). It's up to you. I'm not planning to take on any more mortgages in my life, and I've still get 10 more working years.
My fee-only financial advisor strongly advised me to carry a mortgage in retirement and let the 403(b) funds be. (I was earning much more in my accounts than the rate of mortgage loans.) However, because I told my employer that I was going to retire, the mortgage loan people would not use my income to qualify for a new mortgage, even though the loan payment would be low and easy to carry on my retirement income. As a result, I had to raid my retirement fund to purchase the new retirement house.
My advice to those retiring soon and seeking a new mortgage . . . qualify for the mortgage BEFORE you tell your employer that you are going to retire.
We bought a second home several years into retirement and easily
got a mortgage. They approved it prior to getting all of our investment income verification. They pretty much wanted pension, SS and source of down payment verification .
The issue for you may have been you were buying with your employers salary as part the approval process.
It seems that some people just "feel" good without a mortgage, regardless of the rates. There also seems to be a very substantial percentage of retirees who cannot stand the idea of investing. They think the stock market is the equivalent to a trip to Vegas.
I am one of those who did take out a mortgage in retirement. Just before retiring I sold my house, then traveled and a few years later I bought a new house. The sale of the previous house would have more than covered the costs of the new house, but I took out a mortgage for about $350K instead. That was 6 years ago. Since then the return on my invested $350K has paid for the mortgage costs and returned an additional $100K. These are pretty average sorts of returns. I have a diversified portfolio of mutual funds and nothing that is high risk or speculative.
Well, if you take on a mortgage, that's fixed overhead. No matter what may happen with those investments, that mortgage payment will be due every month, like clockwork. If you get old enough, you won't be able to take on a job to add to income. So you're basically going to place your home at the mercy of the stock market (for investments in equity) and inflation (for fixed income investments). It's up to you. I'm not planning to take on any more mortgages in my life, and I've still get 10 more working years.
Inflation works in favor of the individual who takes a mortgage. Over time the mortgage payment becomes relatively smaller due to inflation.
As to being at the mercy of the stock market, investing usually means a diversified mix. At least it does for me. I have stocks, mutual funds in stocks and bonds, REITs and other investment types. If the stock market drops, right after taking out the mortgage, I can pull out the payments needed until it recovers. If you are 10 plus years from retirement, I hope you have learned something about investing and you have not put your retirement funds in a mattress.
My fee-only financial advisor strongly advised me to carry a mortgage in retirement and let the 403(b) funds be. (I was earning much more in my accounts than the rate of mortgage loans.) However, because I told my employer that I was going to retire, the mortgage loan people would not use my income to qualify for a new mortgage, even though the loan payment would be low and easy to carry on my retirement income. As a result, I had to raid my retirement fund to purchase the new retirement house.
My advice to those retiring soon and seeking a new mortgage . . . qualify for the mortgage BEFORE you tell your employer that you are going to retire.
So you're saying your employer told your mortgage company, when they requested income verification, that you were retiring soon? I was not aware that that was information they should be giving out. Usually they will just give your salary info. I would have given my employer a pretty big hassle if they did that to me.
I also had a mortgage broker turn me down when I was a contract employee. They wouldn't accept my salary because they said it wasn't a "permanent job". There's really no such thing as a permanent job. Anyone can quit or be fired at pretty much anytime. I just went to another lender who understood the concept of working under contract.
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