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Any ER folks refinanced lately without a job?
Old 09-06-2020, 01:54 AM   #1
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Any ER folks refinanced lately without a job?

My 5/1 loan is about to turn to adjustable loan in December/2020. I started looking to refinance and after a third company turned me down b/c I don't have a job, I stopped looking. All three didn't care whether I have over $2M in asset, and the house has 700k in equity (for a loan of 300k). They won't count my dividends, capital gains as regular income.

Did anyone in similar situation had any luck in refinancing latestly? It seems there is a refinance boom and the mortgate companies are very particular about who they want to refinance.
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Old 09-06-2020, 03:14 AM   #2
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Originally Posted by robnplunder View Post
My 5/1 loan is about to turn to adjustable loan in December/2020. I started looking to refinance and after a third company turned me down b/c I don't have a job, I stopped looking. All three didn't care whether I have over $2M in asset, and the house has 700k in equity (for a loan of 300k). They won't count my dividends, capital gains as regular income.

Did anyone in similar situation had any luck in refinancing latestly? It seems there is a refinance boom and the mortgate companies are very particular about who they want to refinance.
If you have a large IRA, you can take a couple of months of regular distributions and use that as income. You need to talk to a mortgage broker that knows how to do these loans. They will explain how to set this up so the "income" will qualify you for the loan. This is NOT an asset depletion loan, which is more complicated and more expensive.

I know someone doing this right now. Once the loan closes, the unneeded distributions will be stopped.

Generally, refinance interest rates are not as favorable as purchase interest rates right now. You might want to compare the anticipated adjusted rate to what you could get with a fixed rate refinance before you pursue the refi.
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Old 09-06-2020, 03:16 AM   #3
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Quote:
Originally Posted by robnplunder View Post
My 5/1 loan is about to turn to adjustable loan in December/2020. I started looking to refinance and after a third company turned me down b/c I don't have a job, I stopped looking. All three didn't care whether I have over $2M in asset, and the house has 700k in equity (for a loan of 300k). They won't count my dividends, capital gains as regular income.

Did anyone in similar situation had any luck in refinancing latestly? It seems there is a refinance boom and the mortgate companies are very particular about who they want to refinance.
I'm not refinancing, but selling current home and buying new. The mortgage guy told me I'd have to set-up regular monthly IRA distributions to get the approval. As soon as I close on new home, I can stop these (and even re-deposit them if within 60 days). This works for me since I'll effectively be using the mortgage as a short-term bridge loan.
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Old 09-06-2020, 12:25 PM   #4
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I have a job, but the application wanted to get my Networth and my 401K,etc. and they computed by NW in the application form. I did a first lien HELOC that is about 35% of what my house is worth. It was approved w a 2.99% interest rate amortization over 30 years. The Feds promised no interest rate hike for a long while, so Im fine with a Heloc as I plan to pay off my house in 3 years.
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Old 09-06-2020, 12:36 PM   #5
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I don't have IRA and am not old enough to draw from my 401k without paying the penalty. So, the option of increasing regular "income" through IRA/401k is not ideal.
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Old 09-06-2020, 01:12 PM   #6
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Could you convert your 401k to a tIRA and then use 72t distributions?
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Old 09-06-2020, 02:02 PM   #7
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I ran into this problem when we purchased our home in March of this year. They wanted to see money coming monthly from our IRA. I asked why would we take money out of our IRA if we don't need it right now? Long story short...we went through the credit union. We had enough cash to live off of in our bank accounts for a few years and didn't need to take any money out.

Credit union worked albeit it was not an easy matter to get the loan done. We had/ have enough to purchase the house outright over 3 times. Go figure.

Anyway try a local credit union.
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Old 09-06-2020, 02:10 PM   #8
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Could you convert your 401k to a tIRA and then use 72t distributions?
This ^^^ will eliminate the early withdrawal penalty, however the 72t will force you to get regular distributions for at least 5 years (or longer depending on your age). I would do the 401k to IRA conversion, then get a couple months of distributions (pay the penalty for those distributions + face any tax consequences), then stop the distributions once the loan is close.
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Old 09-06-2020, 02:13 PM   #9
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I think you have to look for a lender who will use the "asset depletion" method -

"ADU, also known as asset depletion underwriting or asset amortization underwriting, uses an applicant’s assets to calculate a hypothetical cash annuity stream. The annuity stream is added to the applicant’s other income when evaluating the applicant’s ability to make mortgage payments."
https://www.occ.gov/news-issuances/b...n-2019-36.html

I have been calling around and while some loan consultants said they could look at investment income, they all encouraged us just apply for no more than we could qualify for using our SS and pension income. I think a lot of people are refinancing now so the loan officers seem to prefer to process the slam dunk applicants and not the ones that are going to take extra paperwork and longer approval times.

The whole process is not designed for logic or even real risk assessment, at least not from a math and probability standpoint. Lenders will look at your pay stub from your job at some business close to bankruptcy and say sure that's fine, but not your SS benefits due next month, if you have not started collecting SS yet.
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Old 09-06-2020, 02:21 PM   #10
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Although it won't help the OP, this brings up an aspect of retirement planning for younger people. You may want to assume that once you retire you'll never be able to borrow money again and set up your financial life accordingly. That's what we have done.
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Old 09-06-2020, 03:08 PM   #11
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When I bought my truck a few years ago, the salesman said that I’d get $1000 off if I financed through Ford credit.

Ford credit assesses credit worthiness solely on income. I don’t have a pension and hadn’t started ss. The only way that I could get the loan was if my wife (pension) co-signed for the loan.
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Old 09-06-2020, 03:43 PM   #12
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Although it won't help the OP, this brings up an aspect of retirement planning for younger people. You may want to assume that once you retire you'll never be able to borrow money again and set up your financial life accordingly. That's what we have done.
Yes, this is what I fear about retirement and having no job. Banks can view you very differently.

I'm planning to retire in 2.5 - 3 years, so I opted to get a First-Lien HELOC instead while I still have a job, and I just closed it 2 weeks ago. First-lien is less risky for the bank than Second-Lien, so this is also good for the bank's part.

If I pay off my house once I retire in 3 years, I still am able to take money out of the HELOC for the next 10 years for any real emergencies, and it is amortized for 30 years. This should tide me over before I collect social security in case I really need to take some equity out. But most likely, I will not have to use the HELOC.

The Feds already said prime rate will be low for a long time, so I'm comfy with a HELOC that is -.26% below prime rate.
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Old 09-06-2020, 03:53 PM   #13
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Just bought a new home in January without any pension. Financed 80% with no trouble at all. I just started a refinance today with lending.com. They offered me 2.875% for 30 year fixed. Not approved yet but the broker said “no problem anticipated”. We have a fixed monthly drawdown from a brokerage account set up and that satisfied our current lender (CGM mortgage) and looks like it will be fine for the refi with lending.com
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Old 09-06-2020, 06:29 PM   #14
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I bought a commercial building a few years ago, and started remodeling it. After a couple of years we ran out of cash. So we had to get a mortgage on our farm, to get enough cash to finish the remodeling.

It was difficult to get a mortgage, since our house has never had a mortgage on it. We had to start by getting home insurance. Then I went to over a dozen different banks. Most of them refused us, because our only income is my pension. But this January we finally got a mortgage, then in April we got the Certificate-of-Occupancy on our building.

And now we have one retail store as a tenant, a tattoo parlor, and eleven residential tenants. Even with this pandemic lockdown, we filled right up with tenants.
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Old 09-06-2020, 06:53 PM   #15
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After I retired for a year, I transferred a lot of stuff to BofA / Merrill Lynch. They set me up with a half million line of credit based on investment accounts. I think the line is up to 700 grand now due to growth.

Something to be said for the full service bank-broker.
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Old 09-06-2020, 09:16 PM   #16
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Yes, this is what I fear about retirement and having no job. Banks can view you very differently.

I'm planning to retire in 2.5 - 3 years, so I opted to get a First-Lien HELOC instead while I still have a job, and I just closed it 2 weeks ago. First-lien is less risky for the bank than Second-Lien, so this is also good for the bank's part.

If I pay off my house once I retire in 3 years, I still am able to take money out of the HELOC for the next 10 years for any real emergencies, and it is amortized for 30 years. This should tide me over before I collect social security in case I really need to take some equity out. But most likely, I will not have to use the HELOC.

The Feds already said prime rate will be low for a long time, so I'm comfy with a HELOC that is -.26% below prime rated s .


How does the 1st position HELOC work? Your mortgage company agreed to subordinate? Didn’t think they’d agree to that. I believe the earliest lien normally takes 1st position unless a subordination agreement is applied.
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Old 09-06-2020, 09:41 PM   #17
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How does the 1st position HELOC work? Your mortgage company agreed to subordinate? Didn’t think they’d agree to that. I believe the earliest lien normally takes 1st position unless a subordination agreement is applied.
No, the bank issuing the HELOC totally paid off my mortgage. I do not have a mortgage anymore.

It's all HELOC - just a revolving credit. When you apply for HELOC, you can tell them you want first-lien. And they will wipe out all your mortgage balance, and transfer that as your HELOC balance.

If you pay off a large chunk of your HELOC balance, your monthly payment immediately goes down too.
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Old 09-06-2020, 10:30 PM   #18
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Originally Posted by fosterscik View Post
Just bought a new home in January without any pension. Financed 80% with no trouble at all. I just started a refinance today with lending.com. They offered me 2.875% for 30 year fixed. Not approved yet but the broker said “no problem anticipated”. We have a fixed monthly drawdown from a brokerage account set up and that satisfied our current lender (CGM mortgage) and looks like it will be fine for the refi with lending.com
That might be the answer for OP.

An automated monthly transfer from brokerage firm to checking account, might satisfy the income aspect. Might look more official if not simply a self ACH transfer, but maybe it doesn't matter.
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Old 09-06-2020, 11:04 PM   #19
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Maybe look at an asset depletion loan.
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Old 09-07-2020, 01:06 AM   #20
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Could you convert your 401k to a tIRA and then use 72t distributions?

Thanks for the suggestion. I will consider the option when the time comes.
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