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Mortgage question
Old 05-01-2014, 01:30 PM   #1
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Mortgage question

I'm getting ready to move and will be looking to buy soon. So I'm back to the age old question of getting a mortgage or not. It all depends on how much I spend on my new home, I was thinking about downsizing, but the wife is not. So it looks like our next home is going to cost quite a bit more than the one we are selling.

I may have enough to pay cash, but that would put me pretty close on having enough money to get by until I'm that magic age of 59.5. I don't want to do the 72t thing if I can help it.

So my options, as I see it are;

Buy a house worth about the same as the one I'm selling. Not likely

Go ahead and get a 30yr, or 15yr mortgage and just make payments.

Or pay cash and tap some of the money I have set aside to hold me over till 59.5 and take out a home equity loan when I need cash.

If I just go ahead and get a mortgage I can lock in still fairly low interest rates. But I would be paying interest on money I may not need at the time.

If I get the home equity loan I only pay interest on what I take out, but the interest would vary.

Am I missing anything? Suggestions?
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Old 05-01-2014, 01:50 PM   #2
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I'm always on the mortgage side, but it seems like you have a clear benefit in having a make it until 59.5 cushion. You can leave the loan value in your portfolio and maybe you'll make money or maybe not, but the cost should be small if you wait through any stock dips.
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Old 05-01-2014, 05:16 PM   #3
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....If I just go ahead and get a mortgage I can lock in still fairly low interest rates. But I would be paying interest on money I may not need at the time....
But you would also be earning investment results on the funds that you were able to retain because you got a mortgage rather than paid cash.

I actually did a cash out refi for 3.375% just before I retired a couple years ago. I figured it was the last time I could refi and the rate was good. I recognize there is a bit of risk and was willing to accept it.

So far it was a good call as my portfolio has returned 12.34% since I took out the mortgage so I'm ahead about 10% a year. BTW, I don't expect this great spread to last.

I would lean to the mortgage since you have questions on whether you can get to 59 1/2. While it is easy to pay of a mortgage, if you don't have regular income I would think getting one would be hard.
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Old 05-01-2014, 05:26 PM   #4
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I would go ahead and get a 30 year mortgage. You can always pay it off if you want to, but you may not always be able to get a mortgage at current rates (which are still pretty low).
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Old 05-01-2014, 06:14 PM   #5
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Many working parts to your scenario. I'd stay put until DW is ready to downsize.
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Old 05-01-2014, 06:49 PM   #6
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Many working parts to your scenario. I'd stay put until DW is ready to downsize.
House is already sold, we are closing on the 12th. Whats driving the higher price is buying a home with Gulf access. We are renting down there for a few months to look around and try and find something we both like.
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Old 05-02-2014, 01:12 AM   #7
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I've told my wife that if we move, she can get any house she wants as long as it's equal to or less than what we get for our current house. I've been doing this for a couple of years and it may have finally sunk in that downsizing has to be an option. Unfortunately for you, you've sold and don't have 2 years to work on it. I think I'd go with a mortgage since you can always pay it off early should you find extra funds.
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Old 05-02-2014, 06:57 AM   #8
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To be fair, I kind of like the idea of having a dock in the backyard also. It's not for sure yet. If we don't get something on the water we can buy something for less than we are getting for our current house.

It looks like 30yr loans are running around 4.5%. A little higher than last year, but still pretty good.
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Old 05-02-2014, 07:09 AM   #9
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A long term fixed rate mortgage is a good hedge against future inflation. That may not happen, but there aren't many good options to do that. It also means you should reduce the risk a bit in your portfolio, which may not be a bad idea when asset values are above their long term average.
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Old 05-02-2014, 11:22 AM   #10
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It looks like 30yr loans are running around 4.5%. A little higher than last year, but still pretty good.
Make sure you shop around for loans.
bankrate.com gives good comparison and shows a lot of 4.0% rates for 30 fixed.
I was able to beat bankrate twice, by searching lenders or brokers directly (I got lucky with provident.com last time and ALM before that).
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