By Ilyce Glink and Samuel J. Tamkin
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 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.
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: First, how does the housing market upswing affect future home purchases? And should you buy now or closer to when you're going to move?
Regarding the housing crisis, Arizona and particularly 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 has cash and manages to sidestep the fear will profit in a downturn.
Arizona, New Mexico, Nevada and California are all on an upswing. There are more interested 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, you'd be wise to look now for your ideal retirement home and lock in historic low mortgage rates. There is more than one way 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 two 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 be able to rent out the property and cover some or all of your expenses. 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.
(Ilyce R. Glink is the author of many books on real estate and host of "Real Estate Minute" on her YouTube.com/expertrealestatetips channel. Samuel J. Tamkin is a Chicago-based real estate attorney. If you have questions, you can call her radio show toll-free (800-972-8255) any Sunday, from 11a-1p EST. Contact Ilyce through her Web site, http://www.thinkglink.com.)Copyright © 2014, The Baltimore Sun