Mortgage
 

We are selling our home. It is too big for us now that the kids and grandkids don't come down as much. They're growing up and are in college, high school etc. We have a contract on a smaller home 2000SF compared to 4400 and it is only 3 years old, used only in summer not far away and close to the beach. It needs nothing except us. So we will be applying for a mortgage. I will soon be 75 so we hope to stay there as long as we can until we have to downsize probably to a condo. We cant live in a condo now as we need more space as the home we are looking at is roomy and has a huge garage perfect for my detailing business. Our financial advisor is recommending all options when we meet with the mortgage advisor not just the standard mortgage. Some of the options are a 5/1 or 7/1 ARM, since this will not be a long term mortgage. Interest only where we have the option to pay on the principal anytime or any other options available now. We do not want a reverse mortgage. Any advice on this would be much appreciated. Thanks. Ray

I have a mortgage on my current condo. Have refinanced a couple of times since I bought it 12 years ago, so a pretty low rate. I think years ago my ex and I had an ARM on one of our mortgages, but for the most part have had 30-yr fixed. The only advice I've always read is to get the biggest mortgage you can afford no matter what your age. The idea being you keep plenty of more liquid assets for unexpected needs/emergencies. I only financed half of my current place because I had a big windfall from my previous one and felt more comfortable with the lower amount. You may be in the same situation.

Over the decades, we have had a series of 5/1 ARMs both to get the lower rate, and payment predictability for five years. You can always pay more every month to reduce the principle. if you think you'll need a little more time to pay it off, get the 7/1, but the rate will be a bit higher.

Big question. Depends on you.

Are you expecting enough money from the sale of current house to cover a chunk of the new house? Do you expect to have enough to pay it off?
Interest rates will not likely be as low as they have been. They will go up or at least remain stable. You could go for an arm and then pay it off when the bump comes. You do mention a sale and then condo.

Not sure what your income streams are but having a home paid off makes for a much easier retirement depending upon income as well as peace of mind. Easy to sell as an estate asset. You may be able to rent it out in a few years and take advantage of tax ramifications depending on where you finally move to after this. You may not go to a condo.

I anticipate an income slump between 65 and 68 and am selling some assets to kill off mortgage issues. Lower taxes on the asset sell during that time. Might as well lock in the profits and be as debt free as I (we) can be.

Personally, I would not want a mortgage if I was in my 70s. I didn't want one when I was in my 60s and paid off our house when I was 59. I was never one to use the formula of having the biggest mortgage I could afford; I was/am way to conservative for that, although it seems to work out well for many.

Although I passed up lake property I've always been happy never having our house be any real factor into any of our financial decisions. Since we never went upscale we don't need to go down scale.

So Bill, a 5 or 7 year ARM means you can probably get a lower interest rate for those periods. Can you refinance if rates come down during those periods. Not familiar with ARM's.

That's my style. I hate debt with a deep and abiding passion. When I was a small child I saw my folks go through some horrible times with debt. Lenders can be cruel. My last car loan was 1977. Sure, some of my cars were used but I owned them lock, stock and barrel. As you did, I paid off my mortgage in my 50's.

Debt can be a valuable, powerful tool if used cautiously and correctly and a disaster if not.
The key is a an honest set of validated assumptions.
Emotional decisions don't lend themselves well to that model.
( speaking in general not to ray's circumstance)

My better half tends more towards Harry's opinion.
Which makes for interesting discussions.

We're in the same camp as Harry & Dave. If no mortgage is an option and one is not left strapped for cash, that's the way we'd go. If cash is needed you could always get a home equity loan down the line?

We have an equity line available to us. It's good for another 5-8 years? Not sure, I'd have to check. The small balance will soon be paid. I want zero balance when I retire. I like the option to write a check for a major household expense if the need arises, and then decide if we want to fund the expense from savings, or make payments for a little while.

My mortgage is my only debt. I like the interest write-off. Any expenses are covered by my liquid assets, at least so far. So I don't anticipate having to borrow any funds in the future. But I certainly have options if needed. How and how much to borrow is definitely an individual decision. For your situation, Ray, I don't see the point of a long-term (15 or 30) fixed-rate mortgage since you do not anticipate being in the house for that many years. I've owned this condo since Jan 2006, so almost 13 years in and have no plans to leave it.