I am 62. Going to retire in two years. Should I buy down my mortgage now ($42,000) in order to refinance. I would borrow from my 401(k) monies--I have about $430k in the account. Current interest rate on mortgage is 7%--30 Year, Interest Only in 10--will convert to fixed in 2016. I can refi now at a new interest rate of 4.75%--30 year fixed with a $600 per month savings but will also need to repay 401(k) loan. The 401(k) repayment debt is about $400.00 per month with balance due at retirement.
Great question! I have a similar question. I'm 58 and 100% disabled per the VA and the SSA. I am buying a new, more accommodating home and still have my VA eligibility. I can get a 100% VA mortgage at 3.75% interest, 3.769% APR for a fixed, 30 year loan. I too dislike debt and the only long-term debt I have is two mortgages - one on an investment property, and the other for my current home which I will rent once I close on the new house. Rental income covers the mortgage on the first house and based on market analysis, I should be able to rent my current home to cover its mortgage payment.
I also have a USAA self-directed IRA but my return is less than 2% because I am a very conservative, risk averse investor.
Comparing my current IRA ROI and the new mortgage APR, it seems like making a large downpayment is a better use of funds. My initial analysis does not include the taxes I will have to pay on IRA withdrawals. As I am disabled, I do not pay a penalty on my IRA withdrawals.
Does it make sense to use part of my IRA to decrease the amount I borrow for the house I'm purchasing?
Thanks for any insight offered. Jerome