Mortgage strategy

[nickeym]

I'm 71 years old and downsizing, selling my home for around $200K in order to purchase a condo for around $300K. I'm thinking of paying off the ~$40K on my present mortgage from savings, which would free me of the $1233/mo. mortgage payment (the mortgage company just paid taxes and insurance from escrow). I am VA eligible, so could scrape up enough additional cash to make the minimum down payment required for the condo loan. Then I would go ahead and move into the new situation and wait out the sale of my present house, at which time I would recoup the $41K mortgage payoff in the sales proceeds. Home sales are slow this time of year, but if the house doesn't sell until next spring or summer, I wouldn't feel too financially exposed.

My questions are, what is the best strategy? Get the lowest possible fixed interest rate VA loan and just stick with it, investing the eventual proceeds of the house sale including the $41K? Or get any ARM or term that gives the absolute lowest rate right now, then when my house sells, refinance at the best rate available at that time, with a $41K+ down payment? Or are there better options? Then there's the qustion of putting money into down payment vs. points; there are a lot of variables to consider here.

Any advice? Thanks.

[disneysteve]

Welcome. My advice would be to reconsider the whole deal. I don't think a 71-year-old should be taking on a new mortgage at this point in life. Your current home is worth 200K and you still owe 40K, so about 160K equity and you are looking to buy a place for nearly twice that much, so a 140K mortgage. What is your annual and monthly income?

You need a 20% down payment so that's 60K. Do you have that? Yes, I know you can find a loan with a smaller down payment but that doesn't make it a good idea. And I wouldn't buy a new place until the current place is sold no matter what. Do you really want to be paying two mortgages (and taxes and insurance)?

This sounds like a bad deal all around.

[bjl584]

Downsizing to something that costs $100K more than your current home is worth sounds like a bad idea.

If I were in your position, I wouldn't buy into anything new if it meant I had to finance.

[artwest]

Taking out a new mortgage at the age of 71 doesn't sound like a wise idea to me.

It also doesn't sound like much of a downsize when you go from a $200k home to a $300k home.

I would reconsider this plan. Sell your 200k home and then purchase a new downsized home for $200k or less, preferably less.

[disneysteve]

Originally Posted by nickeym

I'm 71 years old and downsizing

Originally Posted by artwest

It also doesn't sound like much of a downsize when you go from a $200k home to a $300k home.

Yes, I found that to be a rather odd definition of "downsizing" too.

[LivingAlmostLarge]

Maybe it's moving from a home in a Lower COLA to a higher COLA condo?

[nickeym]

OK, good conventional advice.

I do agree that waiting until the house is sold is the most prudent move, but was looking for advice on possible alternatives that would get me to my personal objective sooner with a minimum of risk. I'm thinking maybe a forum about savings was the wrong place to ask the question .

[Petunia 100]

Are you positive that condo living is what you want? As with everything else in life, it has its advantages and disadvantages. While it will be nice to have no yard work, will it be nice to be so much closer to your neighbors? Perhaps you should rent before buying, in case you decide you don't like condo living. You might decide you prefer a small single family home instead.

You might consider buying your next home with a reverse mortgage. You put half down and take a reverse mortgage for the rest. No payments and you didn't have to part with 100% of the purchase price.

Another option you might consider is paying off your existing first mortgage with a HELOC. It costs little to nothing to open a HELOC. You will owe interest on your principal balance (accrued daily). The minimum payments will be tiny, likely interest only. The advantage is you get out from under the larger payment on the first while still keeping your cash in the bank.