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pay-off the mortgage or refi: reduce current income to qualify for ACA
Old 08-13-2019, 10:42 AM   #1
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pay-off the mortgage or refi: reduce current income to qualify for ACA

... in order to be under the 400% FPL and qualify for the ACA subsidy.

Our son will be living home soon and I just recalculated what need to be done to qualify for the ACA subsidy from 3 people to 2 people household...

It looks like the only way I can make this happen is to pay-off a significant portion of the mortgage and refinance to go from a mid 80k income to a low 60k income.

The state of CA, next year, will start erasing the cliff but the subsidies still fade out very fast and someone may pay 18% of income with the Silver plan.

Nice write up on the subject and the Calif. document:

https://board.coveredca.com/meetings...ment_Final.pdf

https://acasignups.net/19/07/02/upda...bsidies-reduce
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Old 08-13-2019, 11:46 AM   #2
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Why do you need to pay off the mortgage? If you have the money to pay it off, then you can keep those funds in a savings or investment account and continue to make the payments if you want to. Neither the ACA nor the lender care whether the money you use to pay your mortgage (or other living expenses) comes from income or savings.

Also, didn't you just ask about moving to another state for a new job? Won't the new job have health insurance benefits? How will that affect your coverage in CA?

Lastly, your son can stay on your health plan until he's 26, even if he doesn't live with you, though that's really only feasible if he continues to live in an area where your plan provides coverage.
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Old 08-13-2019, 12:16 PM   #3
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Quote:
Originally Posted by cathy63 View Post
Why do you need to pay off the mortgage? If you have the money to pay it off, then you can keep those funds in a savings or investment account and continue to make the payments if you want to. Neither the ACA nor the lender care whether the money you use to pay your mortgage (or other living expenses) comes from income or savings.

Also, didn't you just ask about moving to another state for a new job? Won't the new job have health insurance benefits? How will that affect your coverage in CA?

Lastly, your son can stay on your health plan until he's 26, even if he doesn't live with you, though that's really only feasible if he continues to live in an area where your plan provides coverage.
Hi Cathy.

If I need the funds every year to pay off the mortgage I need to sell assets; therefore increasing my income. It looks like best to sell assets and refi in the year prior to retirement (before I will need to apply for the ACA).

I am currently job searching although I am on the verge of retirement (FI). The decision is not straightforward: being laid-off, it looks like I am above the long awaited FI level. My son coincidently just graduated, he may go onto a Master's program that I would most likely pay for. If he gets a job instead he will file his own taxes and I can complete the FIRE process.
If he chooses the other path I will be more comfortable with a few years of work.
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Old 08-13-2019, 12:47 PM   #4
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Hi Cathy.

If I need the funds every year to pay off the mortgage I need to sell assets; therefore increasing my income. It looks like best to sell assets and refi in the year prior to retirement (before I will need to apply for the ACA).

I am currently job searching although I am on the verge of retirement (FI). The decision is not straightforward: being laid-off, it looks like I am above the long awaited FI level. My son coincidently just graduated, he may go onto a Master's program that I would most likely pay for. If he gets a job instead he will file his own taxes and I can complete the FIRE process.
If he chooses the other path I will be more comfortable with a few years of work.
Maybe you want to edit your thread title..you are saying refi lengthen your mortgage time and lower your house payments Or what are you saying?
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Old 08-13-2019, 01:04 PM   #5
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Maybe you want to edit your thread title..you are saying refi lengthen your mortgage time and lower your house payments Or what are you saying?
That's is about it: My current dividends bring me to under the 400% FPL for a family of 2 and I can retire with that number without house payments.
To meet the house payments I will need to sell assets and I will be closer to 550% FPL.
I would loose about 10k of subsidies in addition to the 20k mortgage payments. If you look at the assets required to generate the 10k it looks like I would be better off paying off or at least refinancing.
BTW this is using the new California subsidy, it is even more true with the Federal cliff.
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