Retiree couple seeking pointers on relocation

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Rob54keep
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Retiree couple seeking pointers on relocation

Post by Rob54keep »

Details: He (65), she (61): MFJ, No state taxes, Fed 22% (with Roth conversions and her H.S.A contributions)

She will begin SS next year at 62 and he will delay until 68-70 (she will then switch to spousal benefits when he takes SS)

Income: He works part-time: about $10k/year
Monthly withdrawals and withholding from tax-deferred accounts: about $135k/yr

Debt: No debt – own house, value about $400k

Portfolio: mid-7 figures mainly in 401k/IRA’s (~10% in Roth IRA’s) – could us some Roth $ but this is ear-marked for future tax diversification and possible LTC expenses down the road.

Situation: wanting to move closer to daughter/son-in-law and two grand-daughters. Move will be within the same no-tax state. All move’s in the past have been corporate move’s so everything was taken care of by corporations (moving, closing costs, inspections, appliances etc.)

So this would be our first move solo. The house we would purchase would be similar in cost in what we have (~$400k) along with similar property taxes. Costs of move I’m hoping is around $5k and closing costs around $7k.

I’m am thinking about seeking a home mortgage (either VA or conventional) and then paying it off once my existing house sells. The house market where I’m selling is very good and it probably sell with 90 days.

So what are the odds of getting a mortgage with small amount of earned income and periodic/automatic withdrawals from 401K. Is there a better way to attack this?

I am trying to avoid the IRMMA cliff. Thus trying to stay below $174k MAGI in 2020.

What others issues should I be aware of? Thanks in advance.
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Watty
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Re: Retiree couple seeking pointers on relocation

Post by Watty »

Rob54keep wrote: Mon Nov 18, 2019 10:42 am The house market where I’m selling is very good and it probably sell with 90 days.
How is the housing market where you are buying?

I would highly recommend that you try to sell your current house and buy your next house so that you can move directly from one house to the other and not own two houses at the same time.

People do this all the time and it is not that hard to do since things like setting the closing dates, possession dates, and renting one house or another are negotiable.

My son recently sold his old house and then bought the next one on the same day and both of the transactions were done at the same lawyers office to make sure that everything went smoothly. They then had about three days to move their stuff out of their old house.

It was while back but when I did a cross country move I sold my old house and my stuff was in a moving van and I closed on my next house a few days later while my stuff was in transit.

When I bought my first house I needed to move out of my apartment but the house I was buying needed a new roof before the sale could close. The problem was that the roofers were scheduling work out several weeks in advance. I ended up renting the house for several weeks so I could move in early.

Buying your next house and then trying to sell your current house has these problems;

1) Once you move out of your old house potential buyers will likely make lower offers and drive harder terms on any problems that show up in an inspection because they will know that you are a motivated seller. That is how I got the buyer who had moved out of state to pay for most of the new roof on my first house.

2) Lots of extra transactions costs.

3) You need to check with your home insurance company about insuring a vacant house. Some will limit this after the house is vacant 30 days. Some may not want to insure a vacant house at all.

4) The housing market can change quickly if there is some big event like 9/11 or the 2008 stock market crash and financial meltdown. You may not be able to sell your house for what you are expecting.

5) Even if houses in your area sell in an average of 90 days that means that half of them take longer and many of them will be taken off the market without selling. Even if you are right about your local housing market that does not mean that your house will sell quickly at the expected price.
Rob54keep wrote: Mon Nov 18, 2019 10:42 am So what are the odds of getting a mortgage with small amount of earned income and periodic/automatic withdrawals from 401K. Is there a better way to attack this?
A couple of ideal for brainstorming;

1) Get a home equity loan or line of credit on your current house. This needs to be done before you list it for sale. The loan origination costs may be a lot lower.

2) 401k loan.

3) Margin loan on a taxable brokerage account. Some brokerages have a lot lower margin rate so it may make sense to move your account there to get the margin loan.
Rob54keep wrote: Mon Nov 18, 2019 10:42 am – could us some Roth $ but this is ear-marked for future tax diversification and possible LTC expenses down the road.

I am not a tax guru but aren't a lot of LTC costs deductible if you itemize your deductions? If so then you might not need to save the Roth money for that.

Either way the Roth is worth a lot to you so I would not use it for temporary funds for the home purchase.
Last edited by Watty on Mon Nov 18, 2019 11:58 am, edited 4 times in total.
btenny
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Re: Retiree couple seeking pointers on relocation

Post by btenny »

You can get a mortgage on your new home but the rate will not be super low. Plus you will pay points and fees to the mortgage lender for this loan. So the loan will cost you several $K even if you pay it off inside a year. It will not be cheap. Plus you may have to move assets so they can be pledged against the loan. The key is great credit from past loans. I would do it this way even though it is more costly.

If you do not want to spend the money to get a loan and buy the new home first you can do a sale and lease back for 3-6 months. This will allow you to take the money from the old house and use it to buy the new home. Or you can move to an apartment for the interim while you find a new home. Or you can do a contingency purchase based on selling your current home.

A good realtor will be able to help you do all these tasks. Talk to 2-3 before selecting this person and ask about these issues.

Unless you are going to sell your home yourself you will pay a realtor at least 5% to 7% of the sales price plus other closing costs of 2-3%. So 7-8% total of $400K sales price. So more like $32K in costs. A LOT more than $7K.

I also think you will spend at least $10K to a mover to pack all your stuff and move it. And depending on the house size it could be a lot more. Please get some estimates.

Moving is messy and costly. Good Luck.
Arbol
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Re: Retiree couple seeking pointers on relocation

Post by Arbol »

This is how my wife and I moved to Florida.

Bought FL condo with Schwab margin account where my current borrowing rate is 2.9%. No loan fees. Wired from Schwab account to escrow and was able to close in 17 days.

Paid off the margin loan from sale of the prior home.

You could do the same and pay off the margin loan with proceeds from the sale of your current home.

No loan fees, so transaction cost was just the interest between buying and repaying the margin loan. 2.9% is much lower than a conventional home loan.

Margin loan advantage over home mortgage.
1) No loan fees.
2) Lower interest rate.
3) Not needing to qualify for a home mortgage.
4) Speed - one day vs however long it takes to get a mortgage

Margin loan disadvantage over home mortgage
1) Probably can't deduct interest since it's not mortgage interest - only matters if you itemize.
btenny
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Re: Retiree couple seeking pointers on relocation

Post by btenny »

I forgot another point about moving to live near your kids. Do you want to live near your kids or a few miles away or maybe 20 miles away? Think about how all the social issues of living near them will sort out. Do you want coffee together every morning? Dinner once week? Are you going to be a daily baby sitter? A weekly sitter? A activity grand parent? Plus you have not said if you want to downsize or up-size or get a condo so you can travel easier or what kind of housing you are looking to buy. You may want to be flexible to start.

So I suggest you rent in the new location for the first 1-2 years. So you should not need a mortgage to start. So just rent a place near your kids. You have the money so just rent to start. This will give you time to decide where exactly in town you want to live.

In fact I think renting a home near your kids right now is the overall best solution. Treat it as a second home to start. Move some of your stuff and do not sell your old place. Keep both for a year or so. Use the rental to see how you like living near your kids and how they like having you live nearby. Go back and forth and see how things work.

Good Luck.
mnnice
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Re: Retiree couple seeking pointers on relocation

Post by mnnice »

I’m with btenny unless you have already spent a ton of time in the area.
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Rob54keep
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Re: Retiree couple seeking pointers on relocation

Post by Rob54keep »

These are all great ideas. I will look in more detail on these. You got my wheels turning in different directions,,,much thanks!

Good topics to discuss with wife. I know she prefers to be within 10 minutes of my daughter. Currently we are about 1.5 hours away. We are familiar with the area and could fit in (more blue collar than we are use to) but it would create a more difficult commute for my wife's doctor appointments.

The market where we are buying is good, the area where we are selling is very good.

Mortgages aren't cheap.

Margin account. Interesting but these are taxable accounts, yes? Most of my assets are in tax-deferred/tax-free.

401k loan,,,not sure I want to unplug investment assets.

creative sell/buy/lease option. This could work under the right circumstances.

Rent,,,this I will need to discuss with wife. It would allow us to see how her doctor appointments would work out before making a commitment to the area. Nevertheless all these ideas I will chase and discuss with wife. It is so good talking with people that have walked this road before.
delamer
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Re: Retiree couple seeking pointers on relocation

Post by delamer »

There are asset depreciation loans that are based on the value of your investments.

I understand that not all lenders offer them but a portfolio lender and/or mortgage broker might he able to help. (No personal experience.)

Here are the basics: https://www.kiplinger.com/article/retir ... tgage.html
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