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Old 05-10-2021, 05:08 AM   #21
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Originally Posted by daylatedollarshort View Post
Retiree loans, with no employment income, seem to be okay with most lenders (at least most of the ones on the Costco mortgage program) as long as you still have some kind of regularly scheduled income, like monthly SS, annuity payments, pension payments or retirement accounts with automatic, monthly distributions set up. We've been told they need to see the form setting up the monthly distributions and at least one actual transfer. A borrower can have $10B in retirement accounts but apparently they would not give a $100K loan to Warren Buffet unless he had those monthly distributions set up, which can be revoked at any time and as soon as the loan closes. It makes no sense, but that is my understanding of the process and if you want a loan you have to follow the process.

One credit union told me they looked at income on federal tax forms for the past two years, but they were an anomaly.
+1 This is exactly my experience having just closed on a $200,000 refi after retiring. And don't think you can just show last year's 1040 or that you can retire during the process. they check with your "current" employer multiple times right up to the closing date. And yes, closing out a zeroed out HELOC will likely be required, and if you haven't had it opened for long it may cost you to close it. There's something called subordination of the HELOC that you can try, but that will add to your closing costs too.
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Old 05-10-2021, 05:39 AM   #22
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Originally Posted by doneat54 View Post
Which brings me to my question. How easy/difficult is it to get loans when both husband and wife are retired? We think we want to establish a new HELOC with our target new bank *before* DW retires, just to have source of low interest cash if needed, but no fixed plans to use it for anything right now.


So I am interested in hearing about fully retired couples (both husband and wife, if that is the case) experiences with getting loans. I have heard of really bad experiences even though couples may have very large NW's, but no pensions/annuities (we won't have them).

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I don't mean to sound snooty, but here's what came to my mind when reading the title of this thread.

I'm in my 12th year of retirement, and like every other retired person here I am sitting on a substantial nest egg that allowed me to retire, along with a paid off home and car.

The thought of even applying for a loan in retirement seems wacky to me from my vantage point. If I wanted to borrow money (which I don't), I suppose that I'd borrow it from myself.
We went through this ca. 2010. We essentially needed a "bridge" loan so we could buy a new place and still keep the old one to fix it up while remodeling the new place. We needed about 6 months total. Our credit scores were like 820!

Banks didn't want to talk to us because even though we had the assets to purchase the new place for cash they ONLY cared about income. We hadn't started SS yet and pension was modest. We lived on the last of our free cash plus pension and a little bit of 401(k) withdrawals.

One bank said, well, if you can pay cash then why DON'T you. Fair enough, why not? Easy! WAY too much of our stash had ended up in qualified savings (tIRAs and 401(k)) so would have meant BIG income in one year with lots of taxes. We simply didn't have enough outside of qualified plans to "borrow from ourselves."

Finally a bank said show us your taxes for 3 years. Turns out we'd converted a bunch of 401(k) money to ROTHs. THAT was our salvation. Even though we actually had LESS total assets (after all, we had to pay taxes on the conversions) the conversion gave us "income" on our 1040 and the bank was happy with that. That was another reason we were low on non-qualified cash or assets. We'd spent a fair amount on taxes over the 3 years for the conversions. Total balderdash thinking on the part of the bank in my opinion but it got us our loan. Who knew? YMMV
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Old 05-10-2021, 06:54 AM   #23
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OP, in my case I have not got a loan while retired. When I did get loans, my bank would charge me 1% over what they were giving my in interest on my CD's. So, if I was making 1.5% interest on a CD, they would loan me money 1% over that amount. So, I would get a loan with an interest rate of 2.5% interest.

I'm sure I could go in and barrow against a CD today, being retired and get interest at 1% over CD rate.

For me this was a win win and paid off early.

I would think getting a loan without an income but having money with an institution, a loan would be easy to do.
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Old 05-10-2021, 07:16 AM   #24
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OP, in my case I have not got a loan while retired. When I did get loans, my bank would charge me 1% over what they were giving my in interest on my CD's. So, if I was making 1.5% interest on a CD, they would loan me money 1% over that amount. So, I would get a loan with an interest rate of 2.5% interest.

I'm sure I could go in and barrow against a CD today, being retired and get interest at 1% over CD rate.

For me this was a win win and paid off early.
Those of us choosing a mortgage use a different calculation. We plan to keep the money invested over the 30 year mortgage term, and historically, the long term returns in the market have always been higher than current mortgage rates, and mostly much higher.

Sure, there is some risk that the future will be different, but that seems like a very small risk, and one I can afford (my mortgage isn't a huge % of my portfolio). With the historical odds so far in my favor, it seems far less risky than just about anything, including the inflation risk in holding CD/cash.

From an earlier post:
Quote:
Maybe someone can come up with more recent/better sources, but these show 20 and 30 year rolling average total returns for the stock market:

https://awealthofcommonsense.com/201...arket-returns/

https://www.crestmontresearch.com/do...Yr-Returns.pdf

From what I can see, only three 20 year periods dropped below 5%, and only one barely below 4% (out of 78).

Thirty year returns were all above 7.75%
And the average returns of course, are way higher. Historically, investments have beat a 3.5% mortgage over all 20 year cycles, and even the very worst had double the return over 30 year cycles. It's no guarantee, the future could be worse than the worst of the past, but if you don't take the bets that a clearly in your favor, you are unlikely to get ahead.
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Old 05-10-2021, 07:28 AM   #25
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Originally Posted by W2R View Post
I don't mean to sound snooty, but here's what came to my mind when reading the title of this thread.

I'm in my 12th year of retirement, and like every other retired person here I am sitting on a substantial nest egg that allowed me to retire, along with a paid off home and car.

The thought of even applying for a loan in retirement seems wacky to me from my vantage point. If I wanted to borrow money (which I don't), I suppose that I'd borrow it from myself.
... One bank said, well, if you can pay cash then why DON'T you. Fair enough, why not? Easy! WAY too much of our stash had ended up in qualified savings (tIRAs and 401(k)) so would have meant BIG income in one year with lots of taxes. We simply didn't have enough outside of qualified plans to "borrow from ourselves." ...
My case as well. Taking out a loan meant I could avoid paying a lot of tax and pushing me into the next bracket, either cap gains tax on my portfolio, or full tax on a tIRA withdrawal, or dipping into Roths and eating up that tax advantage.

I don't know that I'd categorize W2R's response as 'snooty', but viewing a mortgage in retirement as 'wacky' just seems to be ignoring some of the facts. Why do that? I sure don't view it as wacky to not have a mortgage in retirement, though I do think it is a missed opportunity, but still just a personal choice.

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Old 05-10-2021, 07:40 AM   #26
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Originally Posted by W2R View Post
I don't mean to sound snooty, but here's what came to my mind when reading the title of this thread.

I'm in my 12th year of retirement, and like every other retired person here I am sitting on a substantial nest egg that allowed me to retire, along with a paid off home and car.

The thought of even applying for a loan in retirement seems wacky to me from my vantage point. If I wanted to borrow money (which I don't), I suppose that I'd borrow it from myself.
Same here.
I put excess retirement income into my taxable account where it's available for almost any larger purchase.
The exception would be if I decided to buy a second home, but I don't plan to do that...
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Old 05-10-2021, 07:46 AM   #27
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Originally Posted by W2R View Post
I don't mean to sound snooty, but here's what came to my mind when reading the title of this thread.

I'm in my 12th year of retirement, and like every other retired person here I am sitting on a substantial nest egg that allowed me to retire, along with a paid off home and car.

The thought of even applying for a loan in retirement seems wacky to me from my vantage point. If I wanted to borrow money (which I don't), I suppose that I'd borrow it from myself.

Thanks for all the responses. About what I expected, but some who say they were given loans with no regular, fixed income stream are a little surprising.


We have no predicted need for a mortgage. We just paid cash for a couple 2-3 year old cars, so good there.

We have no pensions, nor annuities, nor plans to get one. NW is significant. It's mostly about the HELOC, at today's rates, versus taking large chunks out of the portfolio and taking the tax sting. It just seems to be cheap money available if/when you need it. I think we will close the HELOC on the present bank and take the cash from the refi to the new bank and see what they have to offer. It will be a sum that should get their attention.
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Old 05-10-2021, 07:46 AM   #28
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I think in some cases it makes sense to carry a mortgage in retirement. But this has been discussed on this forum a number of times already, so I won't reiterate some of the possible considerations. No need to derail this discussion.

I'm 5 years in and I still carry a mortgage myself, so I don't think it's wacky. Obviously.

I did exactly that, paying off my existing mortgage for the first 5+ years of retirement.
Having completed that, I now have that extra monthly income going into my slush fund henceforth...
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Old 05-10-2021, 07:59 AM   #29
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Iím not sure if this belongs in this thread but here it is.

There is something called the ďApplicable Federal RateĒ, published monthly, which is appropriate for loans between family and friends.

https://apps.irs.gov/app/picklist/li...eralRates.html

I used it for a 5-year personal loan to a friend about seven years ago. The rate is typically much less than other lenders would charge.
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Old 05-10-2021, 09:55 AM   #30
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We've used the HELOC for extra expenses after we've reached the ACA income cliff limits for the year. The law has changed now, but in the past if you went $1 over over the cliff, you would use your subsidies. So if I needed an extra $1 over the cliff, I could borrow from the HELOC and pay ~3% interest, or 3 cents, or pay an extra $25K in taxes by losing the ACA tax credits. When one of the kids was in college, tack on another $10K to that in lost state grant money by going over the financial aid cliff, which had a similar amount to the ACA.

I don't think it was wacky to pick the 3 cent HELOC option vs. losing $35K in college grants and tax subsidies.
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Old 05-10-2021, 11:14 AM   #31
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For mortgages You need to show a history of income (last 2 years) and need to have automated withdrawals from IRA to make it look like a pension. They don’t trust you to make withdrawals on your own.
Even if you have 800 credit score.
Car loans just need a good credit score.
This was exactly our situation! Despite an 850 credit score, zero debt and several million dollars earning interest, we were unable to get a mortgage because we only withdrew from the portfolio on an 'as needed basis' (i.e. a few times a year when the checking account got low).

What they need to see were 'regular, scheduled and formal' withdrawals. As such, we just paid cash. Talking to the guy at Fido at the time, he said he runs into this all the time.
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Old 05-10-2021, 03:50 PM   #32
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This was exactly our situation! Despite an 850 credit score, zero debt and several million dollars earning interest, we were unable to get a mortgage because we only withdrew from the portfolio on an 'as needed basis' (i.e. a few times a year when the checking account got low).

What they need to see were 'regular, scheduled and formal' withdrawals. As such, we just paid cash. Talking to the guy at Fido at the time, he said he runs into this all the time.


Yep. I had heard this too and felt it would be beneficial for us to have a HELOC in case we needed cash and didnít want to liquidate investments in retirement. We retired in our mid 50ís and have been living solely from investment income including capital gains, interest and dividends, so about 2 years pre-ER, we got a HELOC with a below prime borrowing rate. The market has been so great we havenít drawn on it since ER, but itís nice to have it just in case.
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Old 05-10-2021, 04:03 PM   #33
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My case as well. Taking out a loan meant I could avoid paying a lot of tax and pushing me into the next bracket, either cap gains tax on my portfolio, or full tax on a tIRA withdrawal, or dipping into Roths and eating up that tax advantage.

I don't know that I'd categorize W2R's response as 'snooty', but viewing a mortgage in retirement as 'wacky' just seems to be ignoring some of the facts. Why do that? I sure don't view it as wacky to not have a mortgage in retirement, though I do think it is a missed opportunity, but still just a personal choice.

-ERD50
Yep! The last thing I'd accuse W2R of being is "snooty"!! I value her opinion and her friendship here on the forum. It's just that each of our cases are so different.

I've often "warned" the young whippersnappers (you know, folks in the 40's) to avoid the mistake I made of putting every last dollar possible into a 401(k) or tIRA to save current taxes. I paid (and am paying) a price for that now and in recent past. If you NEED money, it is SO nice to have "lose cash" or at least already-taxed money handy so you don't have to pay taxes or blow through one of the AGI limits (I ended up doing both one year)

We learn as we go and us old fuddy-duddies (you know, folks over 60 - well 70) love to wax poetic (or some such) and pass along our hard-earned (often painful) lessons to the young'uns. YMMV
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Old 05-10-2021, 05:49 PM   #34
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This was exactly our situation! Despite an 850 credit score, zero debt and several million dollars earning interest, we were unable to get a mortgage because we only withdrew from the portfolio on an 'as needed basis' (i.e. a few times a year when the checking account got low).

What they need to see were 'regular, scheduled and formal' withdrawals. As such, we just paid cash. Talking to the guy at Fido at the time, he said he runs into this all the time.

Fido has an online form to set up the monthly distributions under account setting that only takes a few days advance time to set up and you can have the money deposited in a Fido checking account. The lender we're working with said they just need a copy of the set up form and to see one month's deposits. We did that, but as I said haven't closed yet so I can't say for sure it will pass muster with the underwriter.
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Old 05-10-2021, 06:46 PM   #35
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We refinanced our home two years ago, it was the fourth time in 30 years. The original loan was 30 years and we refinanced later to a 15 year, 3 times. Each time we refinanced , it was a for a lower rate and it was a cashout loan, which was used to pay off a rental property that had a much higher rate.

Any how, the biggest issue we had with a refinance was the idiots who asked for documentation, and didn't understand how to read or understand Schedule E's, or bank statements. Mortgage lenders love to see periodic deposits on the bank statements that show exact income that would be used to make the mortgage payments. But when they see a cash rental payments received on the 1st of one month and the fourth the next month, they don't comprehend that it was paid, but not on the same periodic time. Multiply that by 7 units and they go insane. They loved our pension payments, but didn't quite understand my monthly withdrawals from my performance MM fund to my checking account for monthly expenses. The loan was applied for, approved and closed within 3 weeks.

The add-on HELOC with the same bank was a total nightmare over the same issues, but was finally approved and closed on in 90 days. The same bank did both loans, the HELOC loan did not accept the walkthrough appraisal from the new mortgage that was $50,000 higher than the driveby appraisal, which messed with the debt ratio. The bank employee who worked with me as literally in tears over how bad their HELOC loan dept. ran their business.
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Old 05-11-2021, 06:37 AM   #36
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Fido has an online form to set up the monthly distributions under account setting that only takes a few days advance time to set up and you can have the money deposited in a Fido checking account. The lender we're working with said they just need a copy of the set up form and to see one month's deposits. We did that, but as I said haven't closed yet so I can't say for sure it will pass muster with the underwriter.


I think this depends on the source of the withdrawals. This may work if withdrawals come from IRA accounts. However we are living off our taxable brokerage account and I was told by lenders that regular withdrawals from that donít count.
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Old 05-11-2021, 07:22 AM   #37
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Fido has an online form to set up the monthly distributions under account setting that only takes a few days advance time to set up and you can have the money deposited in a Fido checking account. The lender we're working with said they just need a copy of the set up form and to see one month's deposits. We did that, but as I said haven't closed yet so I can't say for sure it will pass muster with the underwriter.
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I think this depends on the source of the withdrawals. This may work if withdrawals come from IRA accounts. However we are living off our taxable brokerage account and I was told by lenders that regular withdrawals from that donít count.
We didn't get that far. I have a very limited amount of patience when it comes to jumping through hoops. We just wrote a check and were done with it.
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Old 05-11-2021, 07:29 AM   #38
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If we were to start up a 72T (at age 50), would that show income for a loan? Would banks buy that?

I think it does make a lot of sense to get a loan at 3% during this time period....a great inflation hedge. I would probably refi the house we are building. Right now we paid cash for the lot and have paid cash for all of the building materials. I could use the 72T as income for ACA too and just live off the refi loan.
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Old 05-11-2021, 08:36 AM   #39
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Rather than jump through the hoops in previous posts I'm considering moving over to Interactive Brokers to be able to borrow against my assets at IB's dirt-cheap margin rates:

https://www.interactivebrokers.com/e...rgin-rates.php

Anybody else use them for the above?
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Old 05-11-2021, 08:57 AM   #40
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Rather than jump through the hoops in previous posts I'm considering moving over to Interactive Brokers to be able to borrow against my assets at IB's dirt-cheap margin rates:

https://www.interactivebrokers.com/e...rgin-rates.php

Anybody else use them for the above?
It seems like they give you a loan on your existing investments to buy more stocks, not to buy a house or use for anything else. What am I missing here?
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