Q: I am a married, 65-year old retiree. I spent 22 years in the military (with a pension), and then worked another 22 years (44 total) for corporate America. I want to sell our house when my wife retires in 2015.
My wife and I have zero debt. After I retired in 2008, I paid off our house, my wife’s new car and our credit cards. I recently met with our new insurance agent and he told me that I have the best credit score he has seen. We have a very nice financial portfolio, with approximately $210,000.
My question is: We want to buy a house in the Tucson area, where our daughter lives, but we don’t know if we should get a pre-approved bank loan (which we will pay off after we sell our current house) now or wait until we are closer to moving.
We know that the housing market is getting hot and don’t know if we should buy now, have our daughter watch the house for us, or wait.
Thank you for your response.
A: First, congratulations on doing so many things right in your financial life. You and your wife have lived right, paid off your debts, and saved enough cash to supplement the military pension, social security and perhaps other pensions or 401(k) account you’ve accumulated over the 44 years of your work life. That’s no small task.
You’ve asked a couple of key questions that we think will resonate with many of those who read this column. First, how does the housing market upswing impact future home purchases? And, should you buy now or closer to when you’re going to move?
Regarding the housing crisis, Arizona and, in particular the Phoenix/Scottsdale area, was hit very hard. Tucson was also hard-hit and we know several folks from Chicago (our home city) who bought houses or land several years ago, renovated and now own beautiful properties that were purchased at crazy-low prices. But that’s how it works: Whoever manages to sidestep the fear and has cash will profit in a downturn.
Arizona, New Mexico, Nevada and California are all on an upswing. There’s more interest from buyers than there are homes to purchase, and prices are rising. Will that continue? It’s hard to say. But with mortgage interest rates at rock bottom prices, you’d be wise to look now for your ideal retirement home and lock in historic low mortgage rates. There are more than one ways to look at your situation.
Since you’ve paid off your existing home, I’m guessing that you’ll want to get a mortgage to buy the new property so you don’t have to liquidate your savings. It’s a good idea anyway. By the time your wife retires in 2015, mortgage interest may be rising and you’ll be happy you locked in at a low rate.
On the other hand, you have to consider the length of time you’ll own the house in Arizona and the costs of ownership to decide what’s best for you. If you buy the home now, you need to feel comfortable with your financial situation until you sell your current home and move out west. If owning two homes would be too much for you for 2 years or so, you might want to hold off and buy at a time closer to when you actually are ready to sell and move.
If you decide to buy now, you might have the ability to rent out the property and cover some or all of your expenses on the home. You might be able to use the property during the winter and vacations and while visiting your daughter.
Once you sell your current home and move to Arizona, you can pay off the loan or, depending on where interest rates are, you’ll just keep the low interest loan and invest the money from the sale of your home elsewhere.
Good luck. Let us know what you decide to do.