PSA: Tips on getting a mortgage in retirement

[DanP]

Sorry if I missed something in the earlier posts: if one is in a position of having enough assets and can secure an asset-backed LOC at a competitive rate, what is the advantage of changing that to a mortgage?

I'm rusty on the topic but isn't mortgage interest still capped (which may or may not apply here) while the LOC interest would be treated as a deductible investment expense?

 

[ncbill]

Asset-backed LOC @ my brokerage ~3%..."pledged asset line"

Limited to 65% of one's taxable portfolio only.

Others over on bogleheads report negotiating margin loan rates of ~1.5% at other brokers...again, taxable only.

 

[txbill]

IRa's, Roth's, are not defined as sources of income. They are assets They are optional withdrawals by the owner and even the RMDs are not what the bank wants to see. A definable and reliable source of income to repay the loans. They still remember 2008 very well. We just got a 260k loan, after 40% down payment. The accepted available sources of income were ss cks, annuity payments, and 3 year end statements from TD plus current last month end. Good news is current market allows gains in value beyond what most of us have ever seen. EZ leverage and high returns/beats all bonds currently for sure.

 

[Sunset]

Sorry if I missed something in the earlier posts: if one is in a position of having enough assets and can secure an asset-backed LOC at a competitive rate, what is the advantage of changing that to a mortgage?

I'm rusty on the topic but isn't mortgage interest still capped (which may or may not apply here) while the LOC interest would be treated as a deductible investment expense?

a 30 yr fixed mortgage rate won't change. Wouldn't a LOC rate continue to go up as interest rates rise, back in the 1980's interest was easily 15% or more.

 

[DanP]

a 30 yr fixed mortgage rate won't change. Wouldn't a LOC rate continue to go up as interest rates rise, back in the 1980's interest was easily 15% or more.

Yes, thanks, that makes sense. Just did not know if there were other benefits that I was not aware of.

 

[Katsmeow]

As I mentioned up-stream, the key is to talk to the lender and find out what does qualify before you start providing any documentation to them. ......

Some might accept the IRA balance, I don't know. The people I talked to had to see the actual recurring cash flow and that it could be supported for some years (~ 3 IIRC). .

This was our experience 3 times in getting a mortgage or refinance. The person I was dealing with told me what income was needed beyond our SS income. Let's say it was $1500 a month. I would set up a recurring Monthly IRA withdrawal for that amount. I would make sure there had been one withdrawal from it before the application was done. Make the application, provide a document that I downloaded from Fidelity (or Vanguard) showing the recurring withdrawal. Provide bank statement showing that I had received one withdrawal. Loan granted.

Yes, they wanted to make sure you had enough money in that IRA to cover a period of time (I think 3 years but not entirely sure). OK, I just went and checked and Fannie Mae says needs to have enough for 3 years:

https://selling-guide.fanniemae.com...ernment.20Annuity.2C.20and.20Pension.20Income

 

[Winemaker]

My situation is the same as markos; they want to see regular systematic payments. We receive 2 pension checks and about $4500/month in rental income. It does not always come on the same day, and a lot of my folks pay in cash; because that's what a lot of
tax cheating landlord's demand. Mortgage underwriters hate/despise cash received on an irregular schedule. they asked us for 12 months of bank statements from every account we had. Checking, money market, tenant deposit accounts, ad nauseum.

 

[ERD50]

My situation is the same as markos; they want to see regular systematic payments. We receive 2 pension checks and about $4500/month in rental income. It does not always come on the same day, and a lot of my folks pay in cash; because that's what a lot of
tax cheating landlord's demand. Mortgage underwriters hate/despise cash received on an irregular schedule. they asked us for 12 months of bank statements from every account we had. Checking, money market, tenant deposit accounts, ad nauseum.

So it would be interesting if you could have avoided he "ad nauseum", by simply setting up a monthly w/d for the amount needed from your portfolio to your checking account.

In our case, it wasn't a retirement account, just our regular taxable portfolio. And since I just shuffled the money back later, I wasn't forced to sell anything either and take any tax hit.

-ERD50