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Real Estate Issues in Retirement
Old 12-16-2017, 06:00 PM   #1
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Real Estate Issues in Retirement

Good evening all.

I'm retiring approximately one year from now.

I live in a high cost of living area. I sold my home a few years ago in preparation for retirement. I currently rent an apartment and plan to leave this area at the end of 2018.

I am planning to live much of the year in retirement in a northern US state and to spend the winter months traveling.

There are some college towns that interest me for a permanent summer home location. I had been planning to rent there first while scouting out the local real estate, but recently I've read comments that it's much, much easier to get a mortgage before retirement, than after.

I can pay cash for a home, but was hoping to take advantage of lower interest rates and keeping maximum liquidity.

Does anyone have any experience with this? Did any of you have trouble getting a mortgage after retirement? Did you accelerate your plans to purchase for this reason? Thanks
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Old 12-16-2017, 06:22 PM   #2
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Yes, I had trouble getting a mortgage after retiring. Banks don't seem to care if you have $1,000,000 in an IRA. They are more comfortable with working stiffs

And pensions seem to make them nervous as well.
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Old 12-16-2017, 06:28 PM   #3
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Google "Asset Depletion Mortgage"
Here's a relevant article
http://www.kiplinger.com/article/ret...-mortgage.html
(I have no personal experience, but have also wondered about this exact situation.)
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Old 12-16-2017, 07:32 PM   #4
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Quote:
Originally Posted by 48Fire View Post


Yes, I had trouble getting a mortgage after retiring. Banks don't seem to care if you have $1,000,000 in an IRA. They are more comfortable with working stiffs

I had a similar situation. I thought about buying a new house further away from the city. But all my hard-earned money now in investments earning me more money... did not equal a paycheck that could end tomorrow [go figure.]

As it turned out, staying right here in my old home was the better choice. It's in a great part of the city that's close to everything I could ever need and my utilities and property taxes are cheaper.

.
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Old 12-17-2017, 06:59 AM   #5
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When I was involved in the mortgage industry we used investment balance divided by IRS life expectancy table for an imputed income even if not drawing yet. Manually underwriting and not saleable to the secondary market but a nice niche product.
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Old 12-17-2017, 07:17 AM   #6
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Maybe have your investment company/broker write a letter showing your ability to pay due to your (hopefully high enough) assets.
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Old 12-17-2017, 07:18 AM   #7
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Retirement or not, banks want to make sure you can pay the mortgage payment. It is more difficult because the Bank is relying on you to provide your income numbers, not a third party. And likely you are trying to keep your retirement income low, to avoid taxes. Self-employed people go through that all the time.

If you have bad credit, or a minimal income, forget about it. If you would have kept your home and had a HELOC, you can use that. Since you have funds from selling your former residence, you can pay cash.
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Old 12-17-2017, 07:21 AM   #8
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I had trouble getting a car loan after I retired. DW had to sign as part owner because she has a pension and that qualified as income.
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Old 12-17-2017, 07:40 AM   #9
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I have gotten numerous mortgages while FIREd, both refi and purchase. No problem, and no bump on the rate. In some cases they used tax return income and in others they imputed income from the investment portfolio balances. Talk to a mortgage broker and your investment advisor to learn about your options. You have plenty of time.
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Old 12-17-2017, 07:43 AM   #10
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When I was involved in the mortgage industry we used investment balance divided by IRS life expectancy table for an imputed income even if not drawing yet. Manually underwriting and not saleable to the secondary market but a nice niche product.
You need this kind of banker. DH and I downsized a year after I retired. We had invested assets equal to 10 X the value of the house we were buying and were planning on putting 40% down. In the year since retirement, our net worth had increased by $100K. I put some lovely spreadsheets together to show that. I swear they fixated on DH's SS and my $900/month pension and were willing to loan us only $50K less than we wanted.

Some have said they had success with a regular withdrawal set up from their brokerage- e.g. they send you $X,000 on the first of every month. In our case, I just called the broker when we needed another chunk- typically 4 months' regular living expenses plus extras if we'd bought some expensive plane tickets or needed to do major stuff on the house. To the mortgage company, that wasn't regular income.
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Old 12-17-2017, 07:45 AM   #11
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Will you have regular income from a pension? That can be a big factor. I have had no trouble getting a mortgage from PenFed based on that plus my brokerage statement.
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Mortgage lending is still tuff
Old 12-17-2017, 08:12 AM   #12
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Mortgage lending is still tuff

Quote:
Originally Posted by 48Fire View Post
Yes, I had trouble getting a mortgage after retiring. Banks don't seem to care if you have $1,000,000 in an IRA. They are more comfortable with working stiffs

And pensions seem to make them nervous as well.
Based on feedback from this forum, I am getting an extended draw period (35 years) on my HELOC, because I know it will be difficult once the income stream is gone. Shouldn't need it but will rest easy knowing it is there.
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Old 12-17-2017, 09:21 AM   #13
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Will you have regular income from a pension? That can be a big factor. I have had no trouble getting a mortgage from PenFed based on that plus my brokerage statement.
That was my experience also, no problem getting approved with a stream of retirement income coming in.
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Old 12-17-2017, 09:46 AM   #14
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Quote:
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Will you have regular income from a pension? That can be a big factor. I have had no trouble getting a mortgage from PenFed based on that plus my brokerage statement.
^^This. After FIRE I had a really hard time being able to refinance my mortgage. We were living off of cash saving, and had almost no income to list. In later years, after buying a couple of rentals and having the income from those and a small (tiny) business we started, no problem. Even though we had plenty of money to pay cash for the house, no one wanted to loan us money without an income stream. If you can find a banker like Backpacker mentioned you might be OK. But the big companies weren't in the least bit flexible.

Of course, my situation was in 2009-2011, and everybody was pretty skittish back then. They might have relaxed a bit now.
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Old 12-17-2017, 09:52 AM   #15
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I've been thinking more about this. Maybe I am nuts (wouldn't be the first time lol).
When I retire, I will be entitled to receive a reasonably smallish pension - about $22K/year.

I'm talking about a town where it's possible to buy a nice SFH for $200K. I was actually planning to spend somewhat less since the homes in that town are older and I'd like to upgrade it to my own tastes. There are no HOAs. This is the land that time forgot lol.

If I spend $200K that's approx 10% of my NW. I could buy with cash - but there are two issues with that - either (a) I would drain all my current liquid reserves or (b) I would have to tap into taxable or tax deferred accounts and incur tax obligations much sooner, rather than staggered and later.

So, to the poster who mentioned these mortgages as a nice niche - doesn't that usually translate as a premium in costs to the borrower over a traditional mortgage?

THANKS again - all
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Old 12-17-2017, 09:56 AM   #16
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We bought a second home this summer (5 years retired...). We had planned on using all cash, but given the current interest rates we opted instead to borrow half. We could have borrowed more - but I wanted to keep the mortgage within a specific range.

We had no trouble getting the loan. We do have small pensions, so that may have helped. We had to send the bank copies of our pension statement, 401k balances, ira balances, mutual fund balances, and our last two tax returns. We were quickly approved.

Of note - we were only borrowing about .04% of our investments. Iím guessing if we were trying to borrow a larger % they might not have been so agreeable
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Old 12-17-2017, 10:03 AM   #17
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LaurenLuna, we did not charge a premium. This was a smallish local credit union. I've worked at both the big box bank and several credit unions, I would think you'd have better success at a credit union, or a small local bank that chooses to know their customers.
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Old 12-17-2017, 10:34 AM   #18
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I learned an expensive lesson ... Went to purchase another condo after we retired and quickly found out that we were not able to get the loan because we had NO Income...... We quickly had to setup a couple of Annuities showing an income stream for 7 and 10 years.... Once we did that we closed, 15 days later than the original date...... This was not my plan.....
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Old 12-17-2017, 10:39 AM   #19
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Quote:
Originally Posted by 43210 View Post
Google "Asset Depletion Mortgage"
Here's a relevant article
http://www.kiplinger.com/article/ret...-mortgage.html
(I have no personal experience, but have also wondered about this exact situation.)
This article does imply that you can get a mortgage with zero income, just based on assets, but check out the formula and rules.
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Old 12-17-2017, 11:07 AM   #20
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Originally Posted by athena53 View Post

DH and I downsized a year after I retired. We had invested assets equal to 10 X the value of the house we were buying and were planning on putting 40% down. In the year since retirement, our net worth had increased by $100K. I put some lovely spreadsheets together to show that. I swear they fixated on DH's SS and my $900/month pension and were willing to loan us only $50K less than we wanted.

Some have said they had success with a regular withdrawal set up from their brokerage- e.g. they send you $X,000 on the first of every month. In our case, I just called the broker when we needed another chunk- typically 4 months' regular living expenses plus extras if we'd bought some expensive plane tickets or needed to do major stuff on the house. To the mortgage company, that wasn't regular income.

Almost exactly the same problem I had. I had excellent credit, my current house was paid off and I had assets that could buy the new house several times over. But the "formula" the mortgage lender used mainly considered "income" which I took from my investments only when needed and kept as low as possible to save on taxes. In other words, because I was money savvy [not taking income when I didn't need it] and not the "average" worker bee... I was viewed as a risk. Of course, I could have jumped through some hoops and worked around the lender's prejudices. But at that point I was so taken aback and insulted, I gave up on the purchase. Ironically, it was a blessing in disguise.

Many years ago Dave Ramsey discussed the irony that while his personal finances wouldn't pass muster to rent a certain apartment... he had the money to buy the entire apartment complex.

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