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One of my family members is contemplating buying a cooperative unit with cash ($190k). That probably sounds fine, however, if she does this, she won't have much in the way of liquid cash available to her (less than $40k). When I pointed that out, her view was that the only real issue one would need a huge amount of cash for is a medical issue and she has top of the line coverage.
She's 58 with a good job and asked me what I thought of this plan. First, I was aghast but after thinking about it, she's not an investor or anything so her money is all sitting in a savings account earning nothing. She wants to buy outright so the largest output expense-wise per month would be eliminated and if she ever did lose her job, she would only need to come up with about $300. for the maintenance plus utilities, which is a lot more manageable than being on the hook for a mortgage payment.
I suggested that if she went the traditional route and lost her job, she could pluck from her savings to pay the monthly expenses, but she said if she takes a mortgage and pays monthly, she will end up paying twice the price because of the interest and she can rebuild her savings with the money she would have been using to pay the mortgage.
I don't know if I could stomach handing off nearly all of my savings but in some ways this sounds smart. Her plan is to live there until she dies so being able/unable to sell it later is a non-issue.
Would you do this or even consider it? It really has me thinking about the pros and cons.
Last edited by cleasach; 07-12-2013 at 07:10 AM..
Reason: fixed a typo
As long as she has an adequate "emergency fund" I see no reason not to do this. She will build up her reserves again after she buys the house and has no payments.
All that being said, this is probably more of a personal finance question than real estate question and probably belongs in that forum.
As long as she has an adequate "emergency fund" I see no reason not to do this. She will build up her reserves again after she buys the house and has no payments.
All that being said, this is probably more of a personal finance question than real estate question and probably belongs in that forum.
Sorry about that. I wavered on where to put it and picked door number 2.
One of my family members is contemplating buying a cooperative unit with cash ($190k).
...however, if she does this, she won't have much in the way of liquid cash
The question is about context... what OTHER assets she has.
I'll peg that at no less than $1million portfolio to justify committing $190k to a home.
Does she have that? Two Million would be even better.
At the other end is her ability (later) to get a mortgage or HELOC.
Does she have the income to qualify at this level?
The question is about context... what OTHER assets she has.
I'll peg that at no less than $1million portfolio to justify committing $190k to a home.
Does she have that? Two Million would be even better.
At the other end is her ability (later) to get a mortgage or HELOC.
Does she have the income to qualify at this level?
She has about $230k in a savings account and a pension that when she retires will net her about $800 a month. She plans to retire at 66 and collect SS and have the pension. That is it. She has no investments, assets or anything else. She's frugal and carries no debt. She earns about $45k.
I'll peg that at no less than $1million portfolio to justify committing $190k to a home.
What? The median house price in the U.S. is something near $190k and the median household wealth is well below $100k now (and wasn't much above it before the recession). Next to nobody would be able to buy a house by those standards.
The Q isn't about a 30yo young family (who would be getting a mortgage)
Setting aside that at age 58 the aunt should already have a paid for home or a far larger retirement portfolio...
she is too close to retirement to recommend locking in her life savings.
Setting aside that at age 58 the aunt should already have a paid for home or a far larger retirement portfolio...
How is buying a home for cash at 58 different from buying a home with a thirty year mortgage at 28 and having it paid off at 58?
The retirement portfolio should indeed be larger, but you need a place to live regardless of how well your retirement is funded. I don't know if $190k is a good value for the area, but assuming it is, buying can protect you from increasing costs of living and that is going to be a concern for somebody who is coming up on living on a fixed income.
Not sure how it goes in her area, but in my area, housing has been steadily climbing up in value 16% a year. Show me saving account that will match that.
From that on, ANYTHING is possible and MAY happen. It's called LIFE. But as of now, sitting in the bank do nothing her $$ are losing value fast.
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