Poll -New debt in retirement?

[Tailgate]

Excluding credit card and auto loan, have you taken on new mortgage debt after you retired? Any advice one way or the other?

Our situation is we might not be able to afford the home we want to move to using the proceeds from our current home's sale (paid off). We are not upsizing, but newer construction is pricey compared to what our 70 year old home 'might' sell for. We just don't know what our home will bring, so this is strictly a 'what if'.

Just hypothetically, say our home brings 200k and we will want a home that comes in at 275k, so 75k might be the target debt amount... Loan calculator dartboard says 15 year loan at 4.5 is $575 a month.

Guess, I'm just curious about how you feel about debt after retirement.

 

[Tailgate]

Excluding credit card and auto loan, have you taken on new mortgage debt after you retired? Any advice one way or the other?

Our situation is we might not be able to afford the home we want to move to using the proceeds from our current home's sale (paid off). We are not upsizing, but newer construction is pricey compared to what our 70 year old home 'might' sell for. We just don't know what our home will bring, so this is strictly a 'what if'.

Just hypothetically, say our home brings 200k and we will want a home that comes in at 275k, so 75k might be the target debt amount... Loan calculator dartboard says 15 year loan at 4.5 is $575 a month.

Guess, I'm just curious about how you feel about debt after retirement.

whoops...jumped the gun and posted before creating the poll...anyway, interested to see your thoughts....

 

[Tailgate]

crap.. didn't see this discussion in this post... mods..feel free to delete this one.. pretty much same content.

 

[W2R]

whoops...jumped the gun and posted before creating the poll...anyway, interested to see your thoughts....

I added a poll, which might or might not be what you had in mind. If it is not, then any mod or admin can edit it for you.

 

[W2R]

crap.. didn't see this discussion in this post... mods..feel free to delete this one.. pretty much same content.

OK, but that thread is more or less congratulating NextInLine's individual accomplishment in paying off his mortgage, which is a slightly different topic so I didn't delete either one.

 

[David1961]

Guess, I'm just curious about how you feel about debt after retirement.

I would weigh the pros and cons of borrowing the money versus just taking the needed dollar amount from my portfolio. Guess it would depend on the rate.

 

[W2R]

Excluding credit card and auto loan, have you taken on new mortgage debt after you retired? Any advice one way or the other?

The "mortgage or not" question is an endless debate here, and sometimes discussion of it can become almost similar to beating a dead horse. Other times it can be interesting.

There is much discussion in the FAQ's on this topic.

However, it seems to me that a poll showing what we actually do or don't do as far as taking on a NEW mortgage or not, is slightly different. So, instead of deleting this thread I pointed to it in the other thread.

 

[Meadbh]

I have not taken on new debt in retirement, but I would consider it for investment purposes, eg real estate.

 

[sengsational]

I would certainly prefer using money from a low rate HELOC instead of pulling "too much" out of an IRA or 401K to cover a large expense, since the latter would have serious "tax"* consequences.


* "Tax" is in quotes because now we have mixed-in healthcare spending with the income tax calculation.

 

[Gill]

We have moved several times in retirement and, when I felt it appropriate, I have mortgaged a portion of the purchase cost. My principal motivation is tax planning. I have the assets to purchase the house for cash but I limnit my withdrawals from my IRA to the RMD each year, I prefer not to withdraw from my Roth, and everything in my taxable account has large capital gains. It works out better from a tax and investment standpoint to have a mortgage which I could pay off whenever I wish.

As an aside, I took out a 30 year mortgage at age 73 and made the comment at closing that I'd be 103 when it was paid off. My net worth is about 15 times the mortgage so its existence doesn't concern me.
Bruce

 

[Mulligan]

I refinanced my mortgage a couple years ago while already in retirement. I just treat it like a bill. My pension is my monthly "paycheck" so I just amortize any expenses that take a few months to pay. I borrow all the time from the zero percent (2% access charge) as my investment money is "lock box money" never to be spent on anything.
In fact my last vehicle I purchased last summer is on a zero percent credit card. I hate paperwork, so I just use those....quicker and cheaper...


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[bingybear]

I paid my mortgage off in '93... just retired end of feb, so not much chance to get a new one yet. I can understand the use of a loan so one can invest more... But don't think I need to. So I doubt I will go after more loans... but you never know.

 

[Hermit]

I voted "No"

I came very close to co-signing on a Sallie-May loan for my son a couple of months ago. My intent was to get him moved along on being responsible for his college costs. We had to fill out the loan app to find out what the interest rate would be. What a rip-off that whole process is. They wanted almost 12% interest even with me co-signing and hence guaranteeing the loan. They said the rate was based on the student's credit rating. I guess I was there just to make sure they made all that extra money. I will set him up with a secured loan through our credit union for 2.5% instead.

I have been retired going on 2 years. No debt and don't plan on getting any. My idea of a nice retirement is to simplify my life so adding more payments doesn't fit. Now if I can simplify my taxes. The accountant sent me my completed packet - 56 pages long.

 

[frayne]

I avoided debt like the plague prior to retirement and do so in retirement as well.

 

[gerntz]

Yep. Refinanced - new debt - our rental unit.

 

[daylatedollarshort]

I have no emotional attachment to having debt or not, mortgage or not. I do what the numbers in my spreadsheet tell me to do. I just try to maximize my long term net worth after accounting for taxes, tax credits and inflation.

If you could get a zero percent loan on a million dollars, would you take it? I probably would and invest the difference. I would usually not take a 20% loan out on a car. Most other loans are going to fall somewhere on the continuum of being good or bad financial moves.

 

[Alan]

No mortgage, no house. May buy another house sometime in the future if we decide to settle in one location. (we've owned and lived in 5 different houses prior to retirement)

 

[pb4uski]

I voted yes. I refinanced while I was still on payroll but I had stopped working and was "on vacation". It has worked out really well. We pay 3.375% and my average annual return from when we refinanced until today is about 11% per annum.

I figured that to refinance then was a golden opportunity to access cheap money and perhaps make a bit of spread but so far I have made enough from investment results in excess of interest cost to pay for a couple cars.

Sometimes luck is better than skill.

 

[harley]

I retired in 2006. We built our home in 2007 and moved in in 2008. We got a construction loan to build and converted it to a mortgage once we got the occupancy permit. We've refinanced twice since then. I'll carry the mortgage for as long as I can, since the rate is so low.

Having said that, I don't think we could have gotten the mortgage while retired these days. Back then they gave us a $1M construction loan with basically no documentation. The first mortgage was interest only for ~650K, again with no real documentation. When I refi'ed in 2010 to a conventional 30 year (~$400K to get the low conventional rate) it was a little tougher. The last refi in 2013 was a major PITA. We have enough money to pay this mortgage off 5 or 6 times over, but that didn't matter because no income. I doubt rates will be as low as we got again in my lifetime, and I like the idea of arb'ing the loan, so I'll hold it.

I'm not sure how it would work in your case. A lot depends on your cash flow situation. And $75K isn't big enough to be doing it as an investment. So, no advice, just an explanation of what we did.

 

[papadad111]

If I could get a loan I might do it.

Those with steady pension +SS income seem to have a much easier time getting a mortgage/loan than those retirees who "live off of dividends, and drawdowns"

 

[daylatedollarshort]

We belong to several credit unions and all will consider retirement / investing portfolios in making loans and/or count 401K transfers to a checking account as "income".

 

[pb4uski]

I've heard conflicting information on how lenders count "pension" income that is discretionary (like Roth conversions) but as I recall to mortgage brokers told me that if it shows up on the 1040 then it counts, but I've heard from some posters that it doesn't count, so it seems that practice varies.

 

[Walt34]

We choose to have no debt but as others have posted there can be very good reasons for taking on a mortgage. Whether doing so is a good thing is highly individual to each person's circumstances.

 

[travelover]

I bought a new car when I retired and paid for it with a home equity loan, so the interest would be tax deductible. In retrospect, it wasn't worth the hassle, so I paid it off after a year or so.

 

[martyb]

We bought our house about 9 months before I retired, 30 yr VA loan at 4.25%. A little over a year later, this past December, re-financed to 3.50% with very little cost (around $1700 total). Also, I recently bought a new 2014 Chevy Silverado pickup. Financed too, but intend to accelerate payments to pay off in 18 months.

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