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I have been told by my FP that it is often done either for tax reasons or leverage (when buying investment property). The bank is more concerned about means than employment, though for most of us those are one and the same.
Or because you don't have hundreds of thousands of dollars available to pay cash, but have an adequate monthly cash flow.
Or because you don't have hundreds of thousands of dollars available to pay cash, but have an adequate monthly cash flow.
Or even if I do it is tax deferred. So paying cash for a $200K home might require me to withdraw $300K but if I finance it for 10 years I might only have to withdraw $25K per year because of the smaller tax bite and I would be able to earn extra interest.
Or because you don't have hundreds of thousands of dollars available to pay cash, but have an adequate monthly cash flow.
That is a key point. Having no mortgage is fantastic but not entirely necessary as long as mortgage payments are not more then can be easily handled.
Quote:
Originally Posted by ReachTheBeach
Or even if I do it is tax deferred. So paying cash for a $200K home might require me to withdraw $300K but if I finance it for 10 years I might only have to withdraw $25K per year because of the smaller tax bite and I would be able to earn extra interest.
The point you made is much more valuable. If you have to take money from a tax deferred account to pay off the mortgage in a chunk then you should not do that. Taking money in incriments to pay the mortgage is much better. If you do not put yourself into a new bracket you can also take additional to put towards the principle. This will pay it off earlier.
Buying a home in retirement is great. Buying it with someone else's money is not a bad thing. If you can afford the mortgage, so never buy more house then you can afford. If you have ready cash that is not working for you that is okay for a down payment or more as long as it doesn't put you in a situation where you have to eat Kraft Mac and Cheese every day.
There is a fly in the ointment for the paranoid (I might be a little bit)...
I will likely be in FL. I would have the homestead protection from judgments, but a voluntary obligation such as a mortgage is an exception. So if I get sued and lose, assets like a large balance in an account would be in play but my primary residence would not. If the account gets wiped out and you can't pay the mortgage, the bank can take the home. If you own the home outright and don't have enough left in the bank to satisfy a judgment, they can't touch the home. I am not suggesting this as a purposeful way to dodge obligations, just something else to consider. I read about civil cases some times where people lose everything because of something that really was bad luck. In some cases it sounds like they get swindled; no witnesses to defend them and the plaintiff is believed because of corroborating testimony from someone sympathetic to him. Liability policies have exclusions; if a plaintiff claims you were doing something illegal and the judge believes it your policy may not pay. Anyway, it is highly unlikely that such a thing will happen. Extremely unlikely, but possible. I would not pay cash solely because of this possibility, but if I got a summons as the defendant in a civil case I would suffer the tax consequences and have the clear deed in my possession before the court date...
I just learned about that part of the Homestead proteaction against judgements recently. I would do exactly what you plan on the event of being sued: shifting out money from a vulnerable account to pay off the mortgage. It's is an untouchable asset under FL law, although you can be forced to sell it to pay local or IRS owed taxes.
The original question is not being answered by most respondants. The OP wants to know one major thing, the way I read it. Is it difficult to get a mortgage in retirement without a job for income. Basically, who has done this and how did it work.
Actually, the question was answered by the very first respondent, AZDesertBrat:
Quote:
Originally Posted by AZDesertBrat
I don't think having a job, or not, would keep you from buying a house. It's more about what your income/outgo is and credit score. If your SS (and other income sources) are enough to make the mortgage payment and your credit score is good I don't see why you couldn't....
To be even clearer, as long as you have regular, periodic income from a pension, SS, or similar source, then getting a mortgage is as "simple" as it is when you have a job.
Quote:
Originally Posted by luv4horses
Basically, who has done this and how did it work.
Although I paid cash for my first retirement house in Las Vegas, when I subsequently bought a condo in Miami Beach, I decided to just put 20% down and get a 3.5% mortgage. The only difference for me between getting a mortgage while working and getting one in retirement was that instead of providing the loan officer with copies of W-2s, I provided copies of 1099-Rs. Everything else was the same.
i am retired but not collecting ss yet and i may hold off since i may do one day a week or every other week if we are not traveling as a consultant just to give me interaction with others so it isn't the two of us 24/7.
but the bank said they do allow for an asset depletion formula while the first bank we went to said they do not .
the asset depletion formula lops off 40% of your assets , divides that by 360 payments and adds that to whatever pension or ss income you have.
then they use that level to see if you qualify for the loan.
our first bank would only count ss and pension income and no asset income .
it depends who they sell the mortgages to and what that buyers criteria is for what they buy .
we could pay cash for the co-op but i rather just put down 50k or so and then the monthly costs will match our rent .
Last edited by mathjak107; 08-07-2015 at 09:40 AM..
My plan of record is to sell my house to fund assisted living after I've played the 'age-in-place' game to the end, assuming I make it that far. If I need money before that point for some huge emergency and I've managed to zero out all my other liquid assets, I'll borrow against the house.
can't say as we only went to discuss the banks policy so next year when we are ready we know which banks to comparison shop. it was silly to get in to the details.
we did learn that different banks have different income requirements but that is about as far as we got .
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