is it wise or not for first time (small) home buyer age 63 to plan to pay mortgage on 50,000./yr pension?

Asked by Mrshill, Boston, MA Thu Jan 19, 2012

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Kevin Vitali’s answer
Kevin Vitali, Agent, Tewksbury, MA
Thu Jan 19, 2012
I would consider talking to some one who specializes in financial planning especially if there are other assets. Some considerations are:

How important is owning and controlling your own home to you?

Realize if your talking about a single family home their will be the cost of maintenance or if a condo, condo fees. Home ownership does provide a sense of security and control that renting may not.

Are you pulling money out of funds that may be earning a higher rate of return for you to make the purchase?

How does the tax saving play into your financial picture?

What are your intermediate to long term housing goals? If you don't know where your going to be or where you want o be in the next 6-10 years buying may not be right for you.

What is would be the mortgage of a property in the price range you are interested in compared to similar rental properties. Here is an article on buy vs rent you may want to read http://merrimackvalleymarealestate.com/2011/11/rent-vs-buy-s…

Its a very personal decision as well as there being some financial considerations. Good Luck!!
1 vote
Kevin Vitali, Agent, Tewksbury, MA
Fri Jan 20, 2012
I really have to comment again. Its not always about the financials. The question is is it wise.... not can I get a mortgage. Just because prices are low and interest rates are low the decision to buy is very personal and many factors should be considered.

It is hard to fully comment with out knowing your full financial and personal situation. I would strongly suggest talking to a financial planner and discuss your retirement goals and what needs to be done to financial secure your future a house may be part of it or maybe it wont.

Also talk to an agent that is willing to look at the overall picture and help you make the right decision. I think if your short term to intermediate plans are uncertain, buying is not such a great idea.

If there is any pause in thinking if you will be in your home in the next 3-7 years it may not be financially the smartest thing for you. If your pretty certain you will be happy, be able to maintain your home and you plan to be in the area in the next 7-10 years at a minimum than buying would definitely be an option to consider.
0 votes
Tom and Joan…, Agent, Boston, MA
Fri Jan 20, 2012
Home Buyer:

This is a mortgage question, but frankly all that matters are what other debt obligations do you have? If you do not have a lot of debt and right now are paying $2,200 in rent then why not buy? Talk with a great financial person and then get after it. Best
0 votes
Heath Coker, Agent, Falmouth, MA
Thu Jan 19, 2012
I would calculate your payments using the old 28/36 percentages.
This is how old loans were calculated.
Your mortgage (PITI payment -google it) shoule be only 28% of your income.
All your debt: PITI + car + credit cards + other loans + ? should not be more than 36% of your income.

If you can meet those percentages, the old lenders would be mostly comfortable loaning you money.
0 votes
Ted Duncan, , Brookline, MA
Thu Jan 19, 2012
Please email me directly for a no obligation phone consultation with a MA. licensed financial planner.
TDuncan@HammondRE.com
Web Reference:  http://www.tedduncan.com
0 votes
Moy Lopez, Mortgage Broker Or Lender, Quincy, MA
Thu Jan 19, 2012
I am interpreting this question as a " Should I pay cash vs take out a mortgage? " question as opposed to the more basic "Should I buy vs should I rent" As far as a mortgage is concerned, you will qualify for a housing expense equivalent to about 33% of your gross income. Using a $ 50,000 pension, that will get you a mortgage payment of about $ 1,400 per month including property taxes and home insurance. Using a 30 year mortgage of 3.875% your monthly principle and interest cost is $4.70 per thousand borrowed. By the way, lenders will not even think twice about lending you the money on a 30 year term provided you qualify.

You might want to consult a financial planner. But your decision wether or not to take a mortgage vs paying cash should be based on what your monthly income vs expenses allows you to do. Can you still live comfortably if you had to pay the mortgage each month? Will you still be able to do everything you want to do. If the answer is no, then pay cash.
0 votes
Heidi Zizza, Agent, Framingham, MA
Thu Jan 19, 2012
at what price point? the rates are amazing right now a good time to buy
0 votes
Robert D Hug…, Agent, Devon, PA
Thu Jan 19, 2012
I guess Mrshill you need to make that decision. Leveraging(using other people's money) is always better in my opinion. You make the payment so it is comfortable for you on a fixed income and have cash reserves in case of emergencies. You also will have tax write-offs. Besides rates are under 4% for the most part which is practically interest free money being borrowed.

Some people are not pleased and can't sleep at night knowing they owe anyone. If this is the case for you peace of mind; then taking out a mortgage may not be in the plan.

All boils down to one's comfort level Mrshill. Only deal with reputable/knowledgeable professionals to protect yourself.

Best of luck,

Rob Hughes-Long and Foster RE INC.
0 votes
Richard Shap…, , Framingham, MA
Thu Jan 19, 2012
Sounds very reasonable but qualifying also includes considering Taxes, Insurance, and Condo Fee (if buying a condo). Like Ann said, if you are planning to be in the property longer term, then purchasing makes sense.
0 votes
Ann Ryan, Agent, Doral, FL
Thu Jan 19, 2012
As long as you're planning on living in the same place for the next 7 years, it does probably make sense. Talk to a mortgage broker, and get pre-qualified, and find out how much buying power you will have.
0 votes
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