Getting credit as a retiree

[Ginny]

We just refinanced a little mortgage and the lender accepted my letter from Vanguard that I generated myself to withdraw money from my IRA each month. Then they wanted to see my account where it was deposited. I did this for one month and then stopped the withdrawal. Easy peasy.

 

[RobbieB]

I got an informational letter recently from Schwab about using brokerage assets to qualify for loans. I don't know if this is a relatively new offering from them. If so, maybe this sort of thing might catch on among other firms.

Merrill Lynch set me up with a half million line of credit based on assets.

 

[Perryinva]

Just did a refi and ran in to this. Since I’m not collecting SS yet, useable income which was pensions & DW’s SS was not enough, regardless of well over a mil in portfolio. Really annoying part was this year will be my highest taxable income ever, thanks to pension + monthly severance for the next year, but severance does not count as income as it is only for the next 12 months, and they require 36 months severance in order to count! Actually had to set up automatic withdrawal of $2500/mo from a retirement account in order to get underwriting approval. Which is pretty lame, since once the mortgage is sold, and auto payment is set up, I will cancel the withdrawals (same as Ginny, except our lender required a letter head letter from Fido) and go back to my tax efficient income and arter tax account spending plan. Fannie Mae rules are incredibly archaic and counterproductive for FIRE types. Zero cost Refi was good for a $110/mo reduced payment, and $1700/yr interest reduction, so worth jumping through hoops. CCs have never been a problem, but we have and always will have significant enough fixed income.

 

[DeborahB]

I had to do the same but was able to return the cash to my IRA in under 60 days.

 

[Perryinva]

I agree with others that getting a mortgage without a lot of income is a hassle. Some lenders do asset-based lending, but the rate is quite a bit higher. Interestingly, monthly or quarterly regular distributions from retirement accounts are counted as income, but similar distributions from taxable accounts don’t. Go figure.

Exactly that; ran in to the same thing. Even regular distribution from a Roth counts, but not from HYS or CDs. Guaranteed risk free return doesn’t count, but riskier investments do. Crazy stupid. They would only count 1%/yr of 70% of the retirement accounts without an automatic monthly withdrawal. And even then, there had to be enough in the account such that 70% of the account covered at least 36 months of the regular withdrawal.

So someone with an adequate credit score could have zero assets and be on the brink of losing their job, and get approved, but someone with $3M in assets with most of it after tax, could have been living that way for years and so have proven financial responsibility and outstanding credit scores, would be denied because they do t have enough in “retirement” accounts.

 

[karen1972]

One big factor is how old you are will impact the number of options you have. The closer you are to a standard retirement age, the easier it is to get credit as they understand at 59 1/2 you can start taking out money from more sources... if you are under that, it because exponentially harder. IRAs unless you are drawing from them use the IRS Uniform Lifetime Table to calculate an "income", which the younger you are the more ridiculously small that number becomes. If you are looking for just a tiny loan it may not be an issue.

I was 46 so I just paid an extra point for my mortgage by finding a private lender. They used their own rules and were willing to give me ridiculous amounts of money and I only had to provide my Vanguard statement. I plan to pay it off in 5-7 years which allows me plenty of time to pull the money out with minimal tax impact and that point means nothing compared to the tax impact, so for me it was still a win. If I remember right, Freddie rules for asset based at my age gave me something like $650/month allowed for housing on ever $1M in assets which is a joke.

 

[Badger]

We have worked it out so that we don't owe anyone any money and should not ever have to. The only money we owe is on our 2 credit cards that we pay off every month so that is just a temporary "loan" that helps keep track of our spending at no expense to us. Any large expenses like the new car my wife just bought is paid for from cash we set aside for such purchases. Don't really need credit for anything so we froze our credit with the 3 agencies years ago as a safety measure and I am too lazy to make the effort to unlock them so I can borrow to go into debt.



Cheers!

 

[rk911]

We have worked it out so that we don't owe anyone any money and should not ever have to. The only money we owe is on our 2 credit cards that we pay off every month so that is just a temporary "loan" that helps keep track of our spending at no expense to us. Any large expenses like the new car my wife just bought is paid for from cash we set aside for such purchases. Don't really need credit for anything so we froze our credit with the 3 agencies years ago as a safety measure and I am too lazy to make the effort to unlock them so I can borrow to go into debt.



Cheers!

we do precisely the same.