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This could turn into a long post, so I'll try to summarize as much as I can.
I'm recently widowed, with my wife passing away September of last year. I'm semi-retired, meaning I don't have a daily job, but have a couple of random jobs that bring in small amounts of money each month. At the end of this month, I'll turn 57, so I'm 2.5 years away from being able to pull from my IRAs and 3 years away from receiving my wife's social security (can do that at 60 if your significant other passes away).
She left a bit of life insurance that should easily get me through until I reach 60. I have an amount in my IRAs north of $1.3M, but obviously don't want or need to access it right away.
Here's the issue. I'm in a rather large house in a hot real estate market. We bought in 2015 for $285k and Redfin estimates the house value around $605k now. That doesn't include the fact that we added a small apartment to the walk-out basement, so I'm sure the value is a little better than that.
Since my wife passed, I've come to the conclusion that I'm ready to sell the house. The house sits on a 1 acre lot, of which maybe half of it is grass that needs mowing and plants that need attention. I'm ready to give that up as my wife enjoyed working outside with me and without her...it's just work I don't want to do anymore.
If I move downtown (Raleigh), it's likely the amount of profit I make in selling the house won't be quite enough to buy a condo outright and downtown is where I'd like to be. I want a walkable place and a nice view of the southern sky. It's likely I'll have a shortfall of 50-100k.
My credit score is 776 (down a little recently for unknown reasons).
Questions:
1. Will I be able to qualify for a mortgage using my IRAs as collateral since I don't have a steady job?
2. Failing that, could I take out a personal loan to pay the difference?
What are recommendations to get me from point A to point B?
Questions:
1. Will I be able to qualify for a mortgage using my IRAs as collateral since I don't have a steady job?
2. Failing that, could I take out a personal loan to pay the difference?
What are recommendations to get me from point A to point B?
Thanks!
Lots of retired folks apply for and get approved for mortgages. I've done it. Some lenders offer asset-based loans. Be aware, being approved for a mortgage isn't just about your credit score, it's also about your Debt To Income ratio, so they'll be looking into your income from all sources and your assets as stacked against your debts including property tax liability, insurance policies, CC balances, any other debts (car payments? Line of credit?) and other routine costs. Do you own the big house outright or is there still a mortgage? The loan a lender may be willing to offer may not be all that attractive if your DTI is poor. You may present yourself as a better candidate for financing if you wait until you can receive income from the IRA and/or SS.
I don't claim to know interest rates on personal loans, but the rate on a 30 year fixed mortgage may be better than one on a "personal loan". Besides, not a good idea to empty your wallet to pay for a new residence. You need to keep reserves. Don't be house poor. Remember, just because you have a 30 year mortgage doesn't mean you can't pay it off much sooner. Once the big house sells you could easily get out from under it. Be sure to know what if any re-payment restrictions exist on a mortgage (can't pay it off sooner than 6 months, etc).
Last edited by Parnassia; 07-13-2023 at 02:02 PM..
I see smaller homes in downtown Raleigh that you could buy for cash if you sell yours. Condos can be a real pain- buy a small cottage on a small lot- not much land to deal with.
I see smaller homes in downtown Raleigh that you could buy for cash if you sell yours. Condos can be a real pain- buy a small cottage on a small lot- not much land to deal with.
Answering a couple of questions:
I have little debt outside of my mortgage. I pay off my credit cards monthly and both cars we own are paid in full.
I'm targeting a condo because:
1. I'm done with lawn/house maintenance
2. I'd like a view of the southern sky to watch storms approaching. I'm a weather nerd that way.
The idea of renting isn't a bad one, just feels like I'm flushing the money away. And if I can pay it off rather quickly, it'd be nice to have a valuable property, with no mortgage, in a nice area that I could rent out if I decide to travel or live outside of the country for awhile, which is a bit of a longer-term goal.
Do you want to purchase your new home for cash without a loan because you think you won't qualify?
Or perhaps because you are 3 years from having a better cash flow?
I can understand the dilemma but perhaps you should talk to a mortgage lender to see what you might qualify for today. Then you'll have more information to add to making a decision.
You could also rent (as suggested above) for the 3 years until you are eligible for spouses SS. You'll have your home sale money available, info about whether you can get a mortgage (of whatever amount you choose).
Or if you hate moving twice (me too) buy a condo that you can afford with your home sale.
edit to add: if I died first I know my husband would do well in a downtown condo where he could go out to dinner/lunch and not have house maintenance.
A couple of things ,
, Redfin, Zillow, realtor.com, etc often vastly underestimate or overestimate the value of houses. A lot depends on recent sales and the location.
Talk with your friends and interview a couple of good real estate agents in your area and get their opinion as to the value of your house.
If you decide to sell your house and want to buy a new one the real estate agent is going to insist / suggest you get pre-approved for a mortgage. You will then find out
A. if you qualify
B. For how much money and what length of time .
C. At what interest rate .
I have little debt outside of my mortgage. I pay off my credit cards monthly and both cars we own are paid in full.
I'm targeting a condo because:
1. I'm done with lawn/house maintenance
2. I'd like a view of the southern sky to watch storms approaching. I'm a weather nerd that way.
The idea of renting isn't a bad one, just feels like I'm flushing the money away. And if I can pay it off rather quickly, it'd be nice to have a valuable property, with no mortgage, in a nice area that I could rent out if I decide to travel or live outside of the country for awhile, which is a bit of a longer-term goal.
Renting isn't flushing money away. It absolves you of any maintenance headaches and you have the flexibility to move without the headaches of selling. Some of your equity is going to get eaten up on the transaction costs of the selling and buying property so take that into account.
That equity can be socked away into an account that makes you money offsetting rental costs. 5% inters on 605k is 3k annually. If you're willing to have it into the stock market, capital gains and dividends could be higher as well as possible appreciation of the asset.
Renting isn't flushing money away. It absolves you of any maintenance headaches and you have the flexibility to move without the headaches of selling. Some of your equity is going to get eaten up on the transaction costs of the selling and buying property so take that into account.
That equity can be socked away into an account that makes you money offsetting rental costs. 5% inters on 605k is 3k annually. If you're willing to have it into the stock market, capital gains and dividends could be higher as well as possible appreciation of the asset.
Good luck to you. It's a good problem to have...
Agree. Choosing to rent until the big house sale is over and done with, your income stream shifts to include new sources, and you do some downsizing on a more relaxed schedule could be worth quite a bit. Timing is everything. Renting for a while could give you more attractive options once you do decide to buy. You will incur some transaction costs (on selling the big house and/or buying something else) regardless.
Last edited by Parnassia; 07-13-2023 at 04:21 PM..
Questions:
1. Will I be able to qualify for a mortgage using my IRAs as collateral since I don't have a steady job?
2. Failing that, could I take out a personal loan to pay the difference?
What are recommendations to get me from point A to point B?
Thanks!
I don't think a lender will use your IRA as collateral. Lenders can use a formula to consider your IRA in a mortgage calc. Take 70% of balance in your IRA and divide by 360. That is added to your other income to determine your income. I don't know if that is affected by you being younger than 59 1/2.
As for selling your current place, $250K of your gain would not be taxed. Assuming your numbers $605K-$285K=$320K. Any costs to sell will your sales amount and any improvements will increase you tax basis.
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