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Me and my wife currently have a 2 family house in which we owe about $350k and no equity. We really want to retire to Fl in about 20 years. Any advice for a buying a condo now in South Florida, mortgage programs etc.? I know it's very tough to obtain a mortgage nowadays needing at least 15% down and good credit. We have about a 730 credit score but our debit is a little high. We are paying it down.

We would like to pay around 150K
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We really want to retire to Fl in about 20 years. Any advice for a buying a condo now in South Florida, mortgage programs etc.? I know it's very tough to obtain a mortgage nowadays needing at least 15% down and good credit. We have about a 730 credit score but our debt is a little high. We are paying it down.

Find a broker who can obtain for you a "Pay Advantage" loan through United Wholesale Mortgage. You can buy with just 3% down until December 31; in 2014 this increases to 5% down.

Maximum loan amount = 417000
Maximum LTV [loan to value] = 97%
Maximum DTI [debt to income] = 43%
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You may want to reconsider the location of your future retirement home. One factor in a condo in South Florida would be the cost of hurricane insurance/flood insurance which will make your homeowners association fees very, very high.

Donna
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Are you planning on staying in the condo or renting it?
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We really want to retire to Fl in about 20 years. Any advice for a buying a condo now in South Florida,...

My advice would be don't do it. 20 years out is quite a long stretch of time. Even if you love the area now, it can change quite a bit in that time frame, as can your housing needs. And the condo will be pretty aged in 20 years, battered by storms, pests, and use of public areas by others, which you will have been paying for all this time.

You say that your debt is high and you are paying it down, so why would you want to take on more debt? Are your retirement accounts fully funded each year? If not, debt reduction and maxing out retirement accounts would be the way to go to assure you have the best chance of retiring at all. Many people will never get that chance because they do not save enough.

Save the money and invest it. In 20 years you will be amazed at how much of a nest egg you have accumulated, being able to buy something in better shape and more accommodating for your needs.

IP
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Well until retirement we would visit it maybe 2-3 times a year so all the other time during the year..idk
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Well until retirement we would visit it maybe 2-3 times a year so all the other time during the year..idk

That would mean if you want the flexibility of using the place, renting would have to be as a short term vacation rental. Many parts of FL are flooded with these properties, but take a look at VRBO.com to see what a comparable place could rent for. While this will give you some idea of possible income, realize that there are many costs involved as well, including management which can run around 30% of gross income. Or you can self-manage, a challenge from a distance and a job from no matter where. And realize if you want to rent it out, your mortgage rate and down payment will likely be higher, since it is now an investment.

I recently evaluated a purchase in N GA, an area I really like where I feel real estate bargains can still be found. When I looked at the opportunity cost of capital invested towards purchase and furnishing, we could keep our capital and just use the income to rent a place for a few months each year.

YMMV,

IP
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Me and my wife currently have a 2 family house in which we owe about $350k and no equity.....but our debit is a little high.

And 2 leased cars.

First you need a financial plan - have you at least done your goals together ? How the emergency fund ?

On second homes or investment properties, the mortgage requirements are usually more stringent.
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One factor in a condo in South Florida would be the cost of hurricane insurance/flood insurance which will make your homeowners association fees very, very high.

I live in a condo in S Florida. More of a townhouse really, but as a legal entity, it's still a condominium. Not on the beach, a few miles inland. Units in here are going for about $200k right now. My monthly condo fee runs about $300, which covers insurance (hurricane and flood), maintenance, landscaping, pool, etc.
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DH and I thought we were going to go the Gulf Coast beachfront condo route, too (although not in FL). We had cash, and were about 5 years from retirement, so our situation was a bit different than yours.

However....we looked at lots of condos, but once we finally crunched the numbers and what our wants and needs were, we decided to buy a home. We wanted a neighborhood, we wanted a small yard, and we decided we didn't want the risk and cost of being directly on the ocean. Then the gulf oil spill hit, property values really took a nosedive, and we ended up with a 2100 sq ft home built in 2007, about 5 miles from the ocean, list price under 100K. Our home has almost doubled in value, and we are very happy we made the choice we did.

My comment is that what looks good now, may not fit your needs 20 years from now. Wait until you are closer to retirement to make this decision.

Just my 2 cents.

isewquilts
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Me and my wife currently have a 2 family house in which we owe about $350k and no equity.
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We have about a 730 credit score but our debit is a little high. We are paying it down.


From http://boards.fool.com/lease-versus-financing-car-30934485.a...

Me and my wife both lease a car. One of the leases willbe up in a few months.

From http://boards.fool.com/thanks-a-lot-am-yeah-the-house-things...

Yeah, the house things uggghhh....and it dropped in value to about $300k.

From http://boards.fool.com/retiring-55-30921624.aspx

I currently have a 401k with about $160k in it and a Roth IRA with about 10K and about 10K liquid savings

So, you have $10k in liquid savings, are $50k upside down in your house, are leasing 2 cars, between you and your wife have a little over 1 year's worth of income in your retirement funds and you want to buy a condo that you can vacation in 2 - 3 times a year, and retire to in 20 years? That's probably a really quick way to lengthen the time that it will take you to retire there.

I'd say you need to get a much better hold on your finances, before even thinking about buying a vacation/retirement condo, including, but not limited to:

- Pay off your consumer debt

- Build up an emergency fund with at least 6 months of expenses

- Get at money saved up to pay your mortgage down (currently the $50k that you are upside down) and pay closing costs (probably 8% - 10% of your home's value, or currently $25k - $30k) in case you need to sell the house quickly, so that you don't have to bring money that you don't have to the table. You can either use this money to pay down the mortgage (saving you interest), or put it in a separate savings account, as a back up to an e-fund.

- Assuming you have reasonable choices in your 401(k)s, you and your wife should each be maxing out your 401(k)s. If you don't like the choices in your 401(k), at least contribute enough money to get the maximum employer match (if any), and invest what you would have put into maxing out the 401(k) into taxable accounts.

- You and your wife should each be maxing out a Roth IRA

- Quit leasing cars - buy them and run them into the ground. Finance the first couple if you have to, but also be putting money away for a replacement so that you don't have to ever finance a car again.

- Save up money for a 20% (or more) down payment on the vacation/retirement place

Once all that is in place, then you might want to think about buying a vacation/retirement home. But, as others have said, 20 years prior to retirement is a long time to be buying your retirement home. A lot of things could change between now and then, with the home, the neighborhood, your physical situation, etc.

AJ
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Finance the first couple if you have to, but also be putting money away for a replacement so that you don't have to ever finance a car again.

I don't see any problem with financing a car if the terms are right.

PSU
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Finance the first couple if you have to, but also be putting money away for a replacement so that you don't have to ever finance a car again.

I don't see any problem with financing a car if the terms are right.

Okay, I added some bolding to emphasize the key part of the first statement.

Having money saved up to buy a car doesn't preclude anyone from 'financing a car if the terms are right'. However, not having money/assets to purchase a car when one is needed will likely require financing on whatever terms are offered, even if the terms are crappy.

AJ
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mstrelucky74, as others have said, 20 years is a long time out. You and your wife have no idea how much your goals and preferences will change in that time. We've been retired for about ten years now and spend part of the winter in central Mexico. Typically we rent for 4-to-6 weeks which is just enough time to get away from New England winters and return in time for daffodils :-)

Over the last decade we've often seen some attractive homes for sale in our vacation town and DH gets the "let's buy it" bug. Then I run the numbers for him.

The places for sale in that highly desirable town run $250-$350K on average. Occasionally we've found a bargain offered at <$200K. By contrast we spend less than $3,000 total rent on our "villa" for up to 6 weeks. Toss in airfare for another $1500 and counter balance that with food costs that are approx half of what we spend at home, and we're looking at under $5K annually to live in a gorgeous climate with absolutely no responsibility for repairs and upkeep.

As I point out to DH, at $5K/year, we'd have to live another 40 years to equal the $200K cost of buying. And then there was the year we decided to skip our winter retreat and instead go to Europe for a month to celebrate our 40th. If we owned that vacation home, we'd feel obligated to go there exclusively.

Retirement is all about freedom, my friend. I know too many folks (including my BIL) who sold their northern home, purchased in FL or other hot spots, got bored and homesick after 3 or 4 years and went through the hassle of selling it and having to re-purchase back "home" to be near grandchildren or an ailing parent.

Just manage your finances today, save all you can for the future, and keep your 20-year horizon open for the inevitable changes to come. Your preferences, your health, your family obligations may look very different then.


Jeanie
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As I point out to DH, at $5K/year, we'd have to live another 40 years to equal the $200K cost of buying.
I agree with your other points - but I would look at this differently. If you had a mortgage for $160K at 4%, it'd be $6400 in interest
Add in $40K at 6% ROI if invested in the market, and it's another $2400.
But that's counterbalanced with the appreciation of the property. (let's say 2% appreciation?) So that's $4K offset. So the real downside to your net worth is $4800 (quite close to your current $5K).
Of course if you just look at cashflow it is considerably worse ($8800 vs. $5000)
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Okay, I added some bolding to emphasize the key part of the first statement.

Having money saved up to buy a car doesn't preclude anyone from 'financing a car if the terms are right'. However, not having money/assets to purchase a car when one is needed will likely require financing on whatever terms are offered, even if the terms are crappy.


Well, your message didn't come off like that. Also I wouldn't read it that way due to the overwhelming advice here never to finance a car. One group of posters will say you should never finance a depreciating asset. Unless you are going to turn around and sell in a year, I don't see the relevance of the statement. If your keeping a car for many years, the fact that it depreciates shouldn't affect the decision to finance it. To me, the decision to finance is a spreadsheet question. What does the math tell you to do?

PSU
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OK, a thought my wife brought up. My parents live in Tampa on the West coast. Any benefit of having them buy a 55+ condo(really for us) and somehow leaving it to us down the road but in the meantime we would use it 2-3x's a year and so would they? THanks
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My parents live in Tampa on the West coast. Any benefit of having them buy a 55+ condo(really for us) and somehow leaving it to us down the road but in the meantime we would use it 2-3x's a

Didn't your parents tell you when they put that "We're Spending our Kids' Inheritance" bumper sticker on their new Rolls? It's not good to include inheritance in your retirement planning. You wouldn't believe how fast long-term care can eat through what you thought was a nice nest egg.

Meanwhile, how is this supposed to benefit your parents? Now they're stuck with another residence in their area that they have to maintain so you can use it a couple of times a year?

Phil
Rule Your Retirement Home Fool
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