Mortgage help, please and thank you :-)

[bingybear]

Like you, I've not paid interest since the early 90's.
Yes, it is likely that you could invest it at a better rate of return.
Many add the fact that they can write off the interest by itemizing on their taxes. This is really dependent on how much you exceed the standard deduction. For me in my first full year of retirement, I did not have enough deductions without giving heavily to charity. Many things limit deductions... with healthcare deductions being limited to those that exceed 10% of income. If I keep my income low enough that I can deduct health expenses, then the tax rate is small which reduces the benefit. If I do roth conversions up to the top of the 15% bracket... I can write off little to none of my healthcare expenses. Model your situation.

Some people I know had issues getting a loan after retiring due to lack of defined income. You may need to find a lender that will consider your nest egg.

Another good reason to hold a mortgage is that the appreciation on the property... and you pay back with cheaper dollars (assuming we have inflation).

But all this really works if you keep the $ invested.

For me I'm not sure it is worth the time. I look at what the percentage of my investable assets this mortgage would be. If the number is small, is it worth doing? If we go into a deflationary cycle (at least in your housing)... it may bite you.

[canuck5]

Good point ..... the money I would pull out of the house would be about 10% of my investable assets. I need to run the numbers a little more refined with my plans of Roth conversions, etc.. Thanks! Might be more trouble than it's worth.

[convergent]

You are leaving risk out of your calculations. I would not borrow money to invest. There is more risk in that vs. having your home paid for. I did the opposite... took about $100K in an investment account and finished paying off my house several years back. Its all what you are comfortable with.

[eta2020]

Get mortgage if having mortgage will help you to get ObamaCare subsidies. I see no other good reason to carry a mortgage.

[Dash man]

Ask yourself what your comfort level would be if the markets dropped 50% for an extended period of time (think Japan). Would paying your mortgage be an difficulty or would you still feel comfortable?


Enjoying life!

[BigBob]

Another consideration, albiet minor (after having been through this recently) against a mortgage is the abundance of fees when it comes time to buy/sell the house. Lenders require xxx, which costs money to you. (xxx - things like title insurance, documentation fees, yyy fees, survey fees, appraisal fees, not sure of which of these in your situation, but hopefully you get the drift). To me, there is freedom owning my house without a mortgage.

[daylatedollarshort]

We have tried to liability match our retirement funding, so we took our mostly non-cola pensions as annuities, and have them offset in part with a fixed rate mortgage.

[canuck5]

I do appreciate all the advice! I'm now leaning towards, just paying cash, which was my original plan. I knew there was lots more to consider!! Thanks!!!!

I've ridden the markets roller coaster from the Spring of 1987 and I really should be riding in that fishing boat now and not worrying about trying to make that extra % or 2, that will likely be left to the nieces and nephews.

[jfn111]

Quote:

Originally Posted by UpAnchor Well I never figured you would "get" a mortgage. If the banker is considered a "mortgage lender" then I just assumed he would lend you one of his.

Great answer

[Scuba]

I'm in the camp of keeping our mortgage in retirement. If you have enough predictable cash flow that you're confident you can make the payments, and your investments are likely to return well above your mortgage interest rate, it makes sense to carry mortgage debt IMHO.

[Sunset]

I'm in the pay cash group, because unless you itemize your taxes now, there will be no deduction benefit from the mortgage vs standard deduction on income tax.

[athena53]

Quote:

Originally Posted by Sunset I'm in the pay cash group, because unless you itemize your taxes now, there will be no deduction benefit from the mortgage vs standard deduction on income tax.

And, if Canuck is Canadian, there's no mortgage interest deduction in Canada, anyway.

DH and I still have a lot of medical deductions ($12k per year in premiums alone) and charitable donations that we can itemize. We paid zero Federal in 2015 (yeah, I need to do a Roth conversion this year) but it still helped on the state taxes.

[euro]

Quote:

Originally Posted by Sunset I'm in the pay cash group, because unless you itemize your taxes now, there will be no deduction benefit from the mortgage vs standard deduction on income tax.

I agree - people get so hung up on "missing out on that interest deduction". Yes, that deduction is nice IF it even makes sense for you to itemize. I'd guess that for many retirees it doesn't, so that perceived upside of a mortgage is a moot point. I know of course, that borrowing at 3% and investing at 9% is attractive (that's why margin accounts exist), but a lot of people don't GET 9% and as others have noted, this strategy completely ignores the significant added risk of leveraging.
I have nothing against mortgages per se - I currently hold 10 (yep 10) of them, but there are a lot of details that need to go into this decision, and depending on your numbers, it may very well not be worth the trouble and risk for you. In spite of the seductively low interest rates.

[SumDay]

canuck5, we downsized last year and are about the same age as y'all.

We put 70% down, and took out a small mortgage at 3.75%. I just didn't want to touch our "cash" right now. It could have been a cash transaction, but the payment is less than a car payment, and I double up on the principal each month so it will be paid off quickly.

It took me a while to get used to having a mortgage again as our old house had been paid off for ~10 years. My biggest annoyance was the mortgage company made me put the insurance & taxes in escrow. I'd managed to pay them for 10 years without anyone babysitting those funds each month, but that's the only way any lender would do it. I get it, and I'm over it. One way or the other, I have to pay them. Now a bigger chunk goes to one place, instead of two.

Good luck! I don't think there's a right or wrong answer here - it's whatever you're comfortable with.

[Sunset]

Quote:

Originally Posted by SumDay canuck5, we downsized last year and are about the same age as y'all. We put 70% down, and took out a small mortgage at 3.75%. I just didn't want to touch our "cash" right now. It could have been a cash transaction, but the payment is less than a car payment, and I double up on the principal each month so it will be paid off quickly. It took me a while to get used to having a mortgage again as our old house had been paid off for ~10 years. My biggest annoyance was the mortgage company made me put the insurance & taxes in escrow. I'd managed to pay them for 10 years without anyone babysitting those funds each month, but that's the only way any lender would do it. I get it, and I'm over it. One way or the other, I have to pay them. Now a bigger chunk goes to one place, instead of two. Good luck! I don't think there's a right or wrong answer here - it's whatever you're comfortable with.

I always avoid the escrow for insurance or taxes when possible. The reason besides losing the interest on the money which is worth nothing these days, is there are lots of stories of the mortgage company screwing up the tax or insurance payment. Either being late (penalties) or failing to pay (tax sale of property).

[Souschef]

Quote:

Originally Posted by Sunset I'm in the pay cash group, because unless you itemize your taxes now, there will be no deduction benefit from the mortgage vs standard deduction on income tax.

Agreed. When I retired, the housing market was still slow, so I turned my condo into a rental. There was enough equity to get a HELOC which I used to buy our new home outright. Since the loan was against the rental, I could deduct it against my income from the rental. i could still take the standard deduction on my 1040.

[Trawler]

For those who want to get fixed rate mortgage in retirement with no reliable income.
Fannie Mae and Freddie Mac will consider retirement assets to determine income. On a 30 year mortgage they will take your nest egg and divide by 360 to calculate an income as long as you can access the nest egg with out penalty. So if you are 59.5 years old and have say 1,000,000 in tax differed accounts they will credit you with income of $2,770 per month. If you have non tax differed investments they treat the same with out the 59.5 age rule. Most Loan reps do not no this tell them to look it up in the underwriting guidelines. In my case we were not 59.5 thus thru JPM Private Client they waived and made an exception the 59.5 rule due to credit , over 50% down and our relationship with them.

[daylatedollarshort]

Our experience is that credit unions seemed more flexible on looking at assets and accepting a reasonable expectation of portfolio income in retirement. We had no problem getting a mortgage in semi-ER. We did have to provide copies of our retirement account with balances as part of the documentation.

[karen1972]

Quote:

Originally Posted by BigBob Another consideration, albiet minor (after having been through this recently) against a mortgage is the abundance of fees when it comes time to buy/sell the house. Lenders require xxx, which costs money to you. (xxx - things like title insurance, documentation fees, yyy fees, survey fees, appraisal fees, not sure of which of these in your situation, but hopefully you get the drift). To me, there is freedom owning my house without a mortgage.

Maybe its just me but most of the fees you refer to id pay even if paying cash other than the lender fee which was like $1500. Title insurance,surveys, inspections including radon..yep..had too many situations where these things protected me.