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So we found ourselves both retired this year - and surprise surprise, income is down! Pension and a few things (and a low SWR, starting with taxable accounts until we hit 59 1/2 in the next few years as we don't want to invoke SEPP or such) and all is well.

But, a year ago, Mark with his pretty solid GG-15 government job would have qualified for a pretty sizable loan. And now, with assets somewhat locked up for a few years, one of the big banks didn't want to touch us, despite the loan size we asked for consideration for was only about a quarter of the sum of all the invested assets. Didn't matter that some of these securities had sat pretty for decades, that we have had 800+ credit scores for the same amount of time, etc. Retire early? You're truly a boutique case and they don't even understand what to do with you sometimes.

There's a couple alternative courses of action though - pay cash for the retirement house (we could always do this but wanted to see what our options were should we not want to tie up a big chunk in a very illiquid and highly price variable asset), or talk to a local broker. We did the latter and they said we can get a loan for what we are considering buying.

What is the take away? If you're close to retirement, and thinking of buying a new pad, get your reapproval letter or such - should you want that option and not be doing the cash route - before you tell off Lumbergh and not file your TPS report before flipping off Initech for the last time.

The comical bit is that the big bank said we can loan you X for a new mortgage, which was about 1/18th of the balance in our retirement accounts, and I told them that was flat out silly and is less than the equity in our current house, and less than we paid (and sold) a vacation property for over the last few years in a cash transaction. And I told them it was silly because of the rule of 55 and that we can touch 100% of my wife's 401(k) right now if we wanted to, for any purpose, and I don't even think that the big bank or its mortgage broker knew what this is. That will teach me to be an informed investor.

It's a good-ish problem to have. One I had not anticipated, this particular consequence of pulling off FIRE.

And I told them it was silly because of the rule of 55 and that we can touch 100% of my wife's 401(k) right now if we wanted to, for any purpose, and I don't even think that the big bank or its mortgage broker knew what this is. That will teach me to be an informed investor.

Good-ish problem to have. One thing that might work even though you don't want to, is to go ahead start making SEPP withdrawals. Withdrawals from retirement accounts can count as income for mortgage purposes as long as they are documented and likely to continue. Or so I've heard. I have no personal experience with this. However, it might not be a bad idea anyway because you can make Roth conversions.

Withdrawals from retirement accounts can count as income for mortgage purposes as long as they are documented and likely to continue. Or so I've heard.

Yes. We have done this 5 times on refi's in retirement. The rules are in the FNMA guidelines. Most mortgage processors are unaware of this, as it is not very common.
Basically, they want it to look as if it was a regular paycheck.

(I used to know the section of the FNMA guideline, but it has been so long I don't remember it anymore. Google & download it. You just need to point them to the section. It is not likely that I'll be refinancing my 2.5% mortgage.)

1) Show that you have directed the retirement account (IRA/401K) custodian to withdraw $XXX a month and send it to you. This can be done by showing them the form you filled out at the broker. Or other means.
The $XXX needs to be large enough to satisfy the 28/36 rule.

One time they wanted to see the check. So I send them a scan of the check. But I did not cash the check. After the loan closed, I called the broker to re-deposit the check under the 60 day rule, and he said he could just cancel the check as if I never took the withdrawal.
One time they wanted to see the deposit hit my checking account. So I did an ACH from a taxable account at the same broker as the IRA, for the same amount.
One time they just wanted me to state that I did monthly withdrawals.


2) The account has enough money to cover 36 months of the withdrawals.

After the loan closes, you can cease the automatic withdrawals.

Check with your broker. I know Fidelity does asset based mortgages, which they tout as better than going more conventional, but have honestly never checked out the details. Obviously, they prefer to lend you the money than have you take out your money to pay cash.

IP

I know Fidelity does asset based mortgages, which they tout as better than going more conventional, but have honestly never checked out the details. Obviously, they prefer to lend you the money than have you take out your money to pay cash.

With the latter, if I were wanting to buy property, I would prefer not having to liquidate my investment and retirement accounts and would actually want a mortgage. That may be where a lot of folks would land (depending on the interest rate, of course). This is on the plus side.

In the former, this would concern me though since basing my ability to get a mortgage on my investment accounts or a percentage of them would seem to be risky in the case of a falling market. I would assume that if the accounts fell below a certain level that the mortgage would be called so that I would end up liquidating a portion of the accounts at the worst possible moment. And back to the rates again: if these are fixed, then OK, but if they end of mostly being floating rates, that could spell a big hit, again at a bad time. This is definitely on the minus side.

Lots of "what ifs" involved in asset based mortgages.

Pete

basing my ability to get a mortgage on my investment accounts or a percentage of them would seem to be risky in the case of a falling market. I would assume that if the accounts fell below a certain level that the mortgage would be called

I looked into one of these with Merrill Lynch a long time ago.

The documents explicitly said that if the investment account dropped below $XX they would call the loan.

Insanely risky. The interest was the going rate, but liquidation would be like a margin loan.

Lots of "what ifs" involved in asset based mortgages.

Any debt, really. It's just a tool that you need to understand and hedge against the risks. My limited understanding of Fidelity's asset based mortgage is that the loan is still secured by the property, not your assets. Your assets are used to calculate your ability to qualify for the loan, but payment comes from wherever you want. Just like there is no guarantee that you will have your paycheck past the time needed to qualify, could lose your job right after you close on your house, there is no guarantee of where your assets will land down the road. Losing your job doesn't result in the bank calling the mortgage, failure to pay does, and I suspect the same is the case for the asset based qualification for a mortgage. I don't believe it is a margin type of loan with ability to be called. And yes, the rate was fixed...at least the ones we briefly looked at. We did not buy the property that had us briefly looking into it, so we really didn't delve into it deeply. Here's the link: https://fidresi.com/loanoption/asset_loan.cfm

We in fact recently sold our home to a retiree who seemed to have gotten something like the above, though obviously he did not share the details with us. 90% loan to value and they didn't even require an appraisal. Pretty darned sure, however, that he has significantly more assets than we do. Took roughly 4 weeks to close on the sale.

Please understand that I am only presenting an idea for people to look into and do due diligence on. It is possible to get a mortgage without a paycheck.

IP

I asked AI, so reader beware, if the loan could be called if the value of your assets declined. It stated that your assets were evaluated for qualification, not collateral. You may have to liquidate more of your assets than expected to pay the monthly payment, if the stocks went down and you were pulling funds for payment from your stocks. That would be an issue with a conventional mortgage as well. Our payments would have come from our cash account, not our IRAs.

Hope that helps.

IP

We went with a local broker and they got us preapproval - but I'll drop a note to Schwab just 'cause.

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