Question for retirees. As an early retiree, I'm thinking of buying a new house towards the end of next year. I prefer not to pay cash, and I can borrow from my margin account at the rate of 4.75%. My goal would be to pay off in 5 years or less.Should I borrow from my own margin account where the rate could go up, or should I finance 15 or 30 years and find a loan that allows payahead.The kicker here is that I've never tried to buy a house without a job before and I've no idea what the criteria is for a retiree.thoughts?thx,mark
You might get some good answers from this board:http://boards.fool.com/Messages.asp?mid=19034339&bid=100144
The kicker here is that I've never tried to buy a house without a job before and I've no idea what the criteria is for a retiree.The criteria is not much different from those who are still working.Lenders still look at the value of the home to be purchased, the real income of the borrower and hence his ability to repay the loan.The same basic ratios apply..We purchased a home at the time we retired and now 6 yrs later, have borrowed to build a new home by staying within accepted guidelines.I believe most advisors would suggest you not pay cash since it ties up a lot of capital that could be better managed in more liquid assets.Borrowing on margin accounts may be risky but I am no expert.Make sure you know what your expenses will be. Most expect budgets to drop in retirement but, this is not usually the case and expected resources can dry up in a hurry.H.
"The criteria is not much different from those who are still working.Lenders still look at the value of the home to be purchased, the real income of the borrower and hence his ability to repay the loan.The same basic ratios apply.."Thx for that Hotfoot. I've no real idea what those ratios are though. Do you know what they are roughly?All of my income comes from CD's, REITS, Bonds etc, and so income fluctuates, but I can kinda nail it down.We have a home now, but its barely worth 90k. I'd like to buy one worth about 200k in another state...Florida I think. I'd use the 80k profit, 40k in extra money from next year and that'd leave me another 80k to cover. That's the part I'd need to finance somehow.thx,mark
I've no real idea what those ratios are though.You should check with a lender but I expect the monthly payment guideline for the mortgage to be 25% to 28% of your income. That probably includes taxes and insurance along with principal and interest.You need to have your budget nailed down along with the income you expect to take and be prepared to show those assets that will produce the income. Don't forget Social Security income.You mentioned Florida suggesting you are moving out of state. Have you lived in FL for any amount of time? I know nothing of your experiences but suggest a good look around the country before committing to a purchase unless you have "been there."H.
"You mentioned Florida suggesting you are moving out of state. Have you lived in FL for any amount of time? I know nothing of your experiences but suggest a good look around the country before committing to a purchase unless you have "been there.""Wisdom indeed. No we haven't lived there...well my Wife has, but I've always lived in the west or overseas...but mostly in California. I retired early (I'm still only 48) so there's no SS.I have no family except for my Wife, and here family who live in Indiana, so there is no such place as home per se. I do want to live within walking distance of the beach if possible, and I think I can just do that in parts of Florida.We've thought of Renting for awhile, but it gets more complicated when you've got three cats.I've also considered Las Vegas, Nevada, which is only hours away from Calif on the one hand, and has good value and no state tax on the other.Its a BIG decision though, so we are going to have to be very careful!mark
I read this thread and figured there was nothing I could add until I ready mhtyler saying he'd like to "walk to the beach"....WHOA THERE !After living in Florida for the past 8 years...and living close to the water in at least one place, I can safely say that just the land alone for perhaps a 1/4 acre would cost you upwards of $150,000.00 Yes...that 150K not 15K.We just recently sold our home in south Sarasota Cty. that had an assessed value of 293K and our property taxes of 8K per year was the major cause of getting rid of it.Be very careful of Florida...homeowner insurance rates are sky-rocketing (if you can get it at all), hurricane insurance and deductibles are also getting to out of sight, and in some places close to the water insurance is simply not available.Best of luck in your hunt, but don't be in a hurry.Kitty
BobCatKitty said, "We just recently sold our home in south Sarasota Cty. that had an assessed value of 293K and our property taxes of 8K per year was the major cause of getting rid of it."Whoa indeed. Your taxes are much higher than I thought they were down there. ARe they all state taxes are mostly county? I've been checking properties online in the 200k arena and they show taxes closer to 2500 per year...but maybe that's state only and I'd get drawn into something I couldn't afford?outch!mark
Not sure what specific areas you are interested in, but if you know the county, this site (http://www.appraisers.com/consumer/tax_ass/florida.html) should give you a pretty good idea on your taxes. I currently reside in central FL and can attest that property taxes here are about twice that of central GA, where I relocated from. As I am considering relocating yet again!, I am researching Escambia county (slightly higher rates than Marion) and Okaloosa (slightly lower rates than Marion) with even higher rates if the property is within the city limits vs county only. Of course your property insurance will be somewhat higher in the 'county' vs the 'city'.I have read that some insurers were limiting coverages for new residents (State Farm, for one) but I personally have not experienced any problems.arahfool
arafool....where in central Fl are you located? We're spending winter (well, what's left of it) in Umatilla, Fl. We bought a motor home and intend on traveling for a couple of years before settling down again. So far it seems to us that Lake Cty. has not embarked on the high property taxes...along with Highlands Cty. in the Sebring area.As for taxes...a lot of what will show up online are homes that have not been re-sold. We sold a home in Punta Gorda for 245K that had taxes of 2,600K, then when it was re-sold for 333K 18 months later, taxes jumped to 4803.00.Another "thing" Florida has is called a CDD....stands for Community Development District. It's a small unit of government set up by a developer of a new area. The CDD sells bonds to investors to put in streets, street lighting, sewers etc. and all the common area of a community. These bonds carry interest and must be re-paid over a period of years. These fees can amount to thousands of dollars per year (ours were added to our tax bill so at least they were deductible) but more times than not they are simply billed to the homeowner quarterly. There are also ongoing expenses to the CDD like pools, tennis courts etc. and these fees are NEVER paid off. It always pays to ask whether or not the gated community especially if it is a CDD....then our advice? RUN LIKE HELL!!!!!The Villages over here on Hiway 27 is a CDD but appears to be run better, and Celebration in Orlando is also a CDD.Because hubby receives his medical care from the VA, we're looking at the Tampa area as a final destination when we do buy again. But it won't be near the water, or be a CDD.Oh, and when we sold our last house, our HO insurance was $900/yr and flood insurance was $300.
ah jeez, you guys are depressing me. It looks like I may have to consider Plan B: Las Vegas, although Virginia Beach, VA is also an area that looks interesting. Housing prices seem lower there.Since we have few ties, we have the whole country to choose from, but we'd both like to be near the beach. Right now we're in the burbs of Memphis, TN, and that is simply the middle of nowhere to us...not a bad place, but not home either. Real Estate and state taxes are high here for retirees.Las Vegas can get hotter than hell, but that's what A/C is for, and for a smaller city (approx 1million) it has a lot of services and of course entertainment. No beach though unless you count Havasu...which I don't.thx,mark
"arafool....where in central Fl are you located?"We are in the Ocala area, in a Del Webb "Active Adult" community, though it is not a CDD. We are "built out" so the HOA now owns/runs the place (except for the golf course).We looked at the Villages, but it was/is way too populated for our tastes. They will have upwards of 100k people there if they fill it up. I understand that getting tee times there are very difficult.I would say to jmitch that it is very possible to find very affordable digs in FL, but when you add the requirement for beachfront then there are no 'bargains' though I suppose that term is subjective.arahfool
Mark wrote, "I've never tried to buy a house without a job before and I've no idea what the criteria is for a retiree."We've financed and refinanced houses since retiring. I think the lending institutions are concerned about apparent ability to repay the loan. If, as a retiree, you have adequate and reasonably stable income, especially if some of that income is from social security and/or a pension, you might be viewed by a lending institution as a safer bet than an applicant that relies on employment that could be terminated.db
They never asked me, I'm on salary continuation and they just wanted the numbers. No work numbers, no employment verification, nada. Just numbers.
Mark, about Las Vegas -- you want to visit before you buy! We lived there when we were young (Air Force) and it's an experience like no other. I became a hill and sky watcher while we were there. Everything else is pretty ugly -- the desert doesn't even flower in the spring. I missed having seasons, and I missed rain, good cool refreshing rain! When it did fall in Las Vegas, it was muddy from all the dust in the air -- and usually resulted in a flash flood in the city.Then there's your health . . . . as people told us, the climate/dust will either cure you or kill you -- I personally had lots of allergy problems and sinus head aches. My husband actually had pneumonia in July our first summer there -- moving from the air conditioning to the flight line at 115 degrees and back inside again took its toll. Of course, the advantage of retirement is that no one can make you do that if you don't want to!!!The entertainment gets old fast, except as an attraction to bring friends and relatives for a visit. We were young and loved that part of it! Also, we made great side trips -- the Grand Canyon and Death Valley and Salt Lake City and Disney World all come to mind. I guess you could say we had a love/hate relationship with the city! Both our kids were born there, so we have great memories as well as lots of "you wouldn't believe" type stories. I know it's grown immensely since then, but I bet it still has a style all its own -- and that you'd want to experience it for a while before you decided to buy!Barb
Barb said (about Las Vegas)"I guess you could say we had a love/hate relationship with the city!"Thx for that Barb, after comments here I rethough buying vs. renting, and we've absolutely made the decision to rent. We're also looking back in Florida for that reason and others.Our current house is so small and cheap that I can't make renting come out quite even, but by selling the house and reinvesting (and I'll put it in REITS that'll get at least 6%) the math comes close enough.We also get the advantage of being able to move around alot. We've been looking at rents on the Atlantic and Gulf coast. They're cheaper on the latter, but I prefer the former, so we'll see. We want to be close to the beach, and we've found some properties within walking distance.If we get tired of Florida (or Vegas for that matter) we can move in a heartbeat, and we can always buy a place later.The downside: Privacy. I still remember everything from loud parties, arguing and fornicating coming through the next wall, and of course you have the Gestapo Management aspect.Rent vs. buy has been hashed out on a dozen boards ad infinitum, so I'll leave it at that, but for now that's where we're headed.thx,mark
mhtyler sez:We also get the advantage of being able to move around alot. We've been looking at rents on the Atlantic and Gulf coast. They're cheaper on the latter, but I prefer the former, so we'll see. We want to be close to the beach, and we've found some properties within walking distanceNot sure how appropriate it is to the locales that you are considering but you might want to check in those communities that have lots of "snowbirds". As they do not normally use their FLA homes in the summer, you might find some good options there. Not too much of the loud parties, arguing and fornicating going on around here <g>.arahfool
As a mortgage broker, I can tell you that it is illegal to consider age when taking a mortgage application. And frankly the lenders don't really care how old you are. I just did a 30 yr loan for a 68 year old and it was not an issue. She had SS and a part time job and more than qualified for her loan. The top Debt to Income ratios allowed by most lenders are about 40% to 42% but I always dscourage people from going that high. It's hard to actually live with 40% of GROSS incoem going to housing costs. I'd stay at about 20-25% or less if you can. Much more comfortable for you. We are at 20% and it's a good level. You have money to do other things in life and still get a tax deduction.(PS...I retired from another career and started this at 51 and love doing mortgages!)Marilyn
"Not too much of the loud parties, arguing and fornicating going on around here <g>."Mores the pity, I would say.Bennie
but I've always lived in the west or overseas...but mostly in California. I retired early (I'm still only 48) so there's no SS.Two questions:One. Calif should offer lots of seaside living. Have you ruled that out?Two. At age 48, who will you play golf with during retirement? Most retired golfers, retired people for that matter, are older. Who are you going to hang with? My brother-in-law, who could have retired at 45, had to prop up his playing partners! He chose to keep working.Not that we retirees aren't interesting, it's just that we are only interesting for a short time and it's time to nap.We spend winters in central FL in a 55 & over mobile home park with 600 sites and a great hall, activities, management and nice PEOPLE. We love it, for 3 to 4 months.We have looked at the Del Webb types and are not ready for that kind of canned structure. The developers and planners are preparing for a mob and rightly so, but will they come?? Will they enjoy??For us,I expect it will come to a decision to stay in OH and finish it all up or, at the appropriate time, stay in FL where we would be with people with similar needs, wants, opinions, concerns, etc.Check it out and then go back to work for ten years. You may be retired for 40 years!H.
hotfoot asked, "Two questions:One. Calif should offer lots of seaside living. Have you ruled that out?Two. At age 48, who will you play golf with during retirement?"Taxes are too high in California (9%), and I don't play golf.As to who will I hang with? That's a sore point. Most of my family and friends have died in the last few years, and I was working overseas pretty much for the last 10 working years, so I don't have much of a support system.However, going back to work to make friends isn't in the cards, and in any case working to keep busy is just avoiding the issue.Back to the first question, I'm looking at Florida, which has a wealth tax that may not be too bad, and Nevada which has no income tax at all.In the short term we've decided to rent, since we have no family or friends to live near we kinda' have no home either. Well my Wife has her folks in rural Indiana, but we're not going there.I confess I'd like to be in California if I could afford it. I lived most of my adult life there.
Let me count the ways: Tiberon, Belvedere, Pebble Beach, Hope Ranch, Montecito, Malibu, Newport Beach, Laguna Beach, La Jolla, all nice little seaside communities in CA --oh, and all very expensive!db
When you do settle where you want, check to see how long of a financial history as a retiree they want.I'm a recent retiree, also without SS. I wanted to refinance at a lower rate and was told I would need a 2 year retired financial history.
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