Trading up or additions

[mumgoa]

I am 45 and between my wife and I we have enough income to afford a bigger and newer house. The mortgage payment will be comfortable on a 30 year fixed loan. However, the concern is at age 45, is it advisable to get a 30 year loan (20 year becomes unaffordable) or make additions (which will be comfortable with the Home equity loan)?

We see people in mid-40s trading up and always wonder how they do it (assuming it is a 30 year loan).

If we bank on home values going up, then it is a good position if you want to sell after 20 years and retire but if you are underwater at age 65, there will be a serious issue.

Just wondering if any other math goes into getting a 30 year loan in mid-40s. Based on what we see, people are risking it all over the place and maybe we are just the risk averse types.

[humandraydel]

IMO the fact that a 20 year is unaffordable means you can't afford it. Besides that do you really want a bigger house in your 60s and 70s? Will it just be you and your wife? Personally, I plan on having my house payed off around age 40, so there is NO way I would continue to carry a mortgage into my 60s or 70s. To me, a mortgage means a delayed retirement and a bigger house simply isn't worth working 10 extra years.

[MonkeyMama]

We see people in mid-40s trading up and always wonder how they do it (assuming it is a 30 year loan).

Just wondering if any other math goes into getting a 30 year loan in mid-40s.

How do they do it? They have a mortgage into eternity. In this economy, many end up losing their home entirely. {Several of my parents' friends who have bought up over the years are now facing foreclosure in their 60s. In contrast to most the financially savvy people I know who have not had a mortgage since about age 50-ish}.

Personally, the oldest age I would take on a 30-year loan is at 35. We actually did refi another 30 years in my 35th year. Though we plan to pay off our mortgage WELL before 30 years, I just personally could not stomach even the slightest possibility that we could still be stuck with a mortgage past age 65.

I grew up in a very high cost area, so there has never been much appeal to buying up or buying more. The cost is just too great. But I certainly appreciate the aspect of being able to be very happy with very little. It's not something you see a lot of in our culture. In our current lower cost haven people are appalled by our long-term plan to downsize back into a condo. (We enjoy having a bigger house with kids, but doesn't see the point at all once they are grown. We really liked the simplicity of owning a condo).

Of course, this perspective also makes me more tolerant of having a mortgage. I am sure many here would say you should never take on a 30-year mortgage.

[scfr]

Is taking out a new 30 year mortgage at age 45 advisable? No. 0-15 years would be more advisable.

Regarding additions, is saving up and paying cash an option?

[snafu]

I'm confused. What are your top 10 reasons for a newer, bigger, higher cost house? Are you thinking about buying a newer, bigger house because you view it as a long term investment? It's such an illiquid, expensive investment. You will be looking to sell, looking to pack up, looking to move at age 60 or 65. All extremely very stressful scenarios. You will be paying a lot of interest and I'm guessing lots more municipal [property] taxes. Your retirement choices and decisions will be impacted if you stil have a signifiant mortgage owed.

Secondly, I hope you will run the figures of your proposed mortgage amortization schedule which takes approximately 20 years until principal equals interest on those 360 monthly payments to come.

[autoxer]

We see people in mid-40s trading up and always wonder how they do it (assuming it is a 30 year loan).

Keeping up with the Joneses.

Just wondering if any other math goes into getting a 30 year loan in mid-40s. Based on what we see, people are risking it all over the place and maybe we are just the risk averse types.

Most of the people doing it, don't really do the math ahead of their decision. They only do the simple math of 'can I make the payment?', not what the long term consequences are.

An older guy that used to work here thought it was hilarious that the bank gave him a 30 year mortgage, because he knew he wouldn't live that much longer.

[Blessed]

Is taking out a new 30 year mortgage at age 45 advisable? No. 0-15 years would be more advisable.

Regarding additions, is saving up and paying cash an option?

I 100% agree. Who wants a bigger mortgage in retirement. We are just a few years younger than you. We traded up. However the 1st house had been paid off quite a few years and we added the extra needed cash to end up with NO mortgage.

I think at 45 it is good to be risk adverse! How close are you to paying your current home off? Perma-debt is not going to make retirement easier for most of us. Those people you see upgrading may not have a comfy of a retirement as you may.

I know someone in their 60's that just took out a 30. Yikes!!!

[disneysteve]

I agree with the others. Don't base your decisions on what everyone else is doing because everyone else is broke and in debt up to their eyeballs. I've read several articles about how more and more retirees have mortgages which just seems insane to me. If you aren't debt-free, you've got no business retiring.

I'm 48. We refinanced a few years ago into a 15-year mortgage and have been prepaying that. We owe less than $60,000 at this point and it will be paid off well before retirement. We actually have the savings to repay it at any point and I've been thinking about that more and more but our daughter starts college next year so I want to wait and see how that impacts our finances.

If you can't afford to upgrade on a 15-year mortgage with a payment of no more than 28% of income, you can't afford it.

[feh]

I 100% agree. Who wants a bigger mortgage in retirement. We are just a few years younger than you. We traded up. However the 1st house had been paid off quite a few years and we added the extra needed cash to end up with NO mortgage.

I think at 45 it is good to be risk adverse! How close are you to paying your current home off? Perma-debt is not going to make retirement easier for most of us. Those people you see upgrading may not have a comfy of a retirement as you may.

I know someone in their 60's that just took out a 30. Yikes!!!

I'll add my voice to the chorus -there's no way you should be starting a 30 year loan at 45.

Please re-examine your reasons for wanting to "trade up". Ignore what other people are doing - their finances are probably a mess. Own the house you need, not the house you "can afford".

[LivingAlmostLarge]

Why are you buying the house now? Are you newly married and starting a family? Did you want like a lot of my friends now to have a first kid at 40+? If so then i'll be dissenting voice and say maybe a 30 year is okay.

Maybe the plan is to move into a new home for 18 years then downsize? Which isn't always the worse thing. I know everyone wants a paid off mortgage at 55 or something but what about not paying it off and then moving and downsizing at the time of retirement? That's another thread I think.

[Gailete]

My first question, like the others, is WHY do you want a bigger place? who cares what others are doing? their financial situation is probably far different from yours (either worse or better it doesn't matter). If there is no good reason to have a bigger place then forget about it. Having several teens that are driving you crazy in a smaller house, isn't a good reason to upsize as they will be gone in a few years. You don't want their home to be so comfy that you won't be able to get them out and off living on their own.

The only math you need to figure is whether or not you have 10 GOOD reasons for upsizing and also if you have 10 good reasons for staying in the same place. Then look at 10 side effects if you don't move up and 10 poor side effects if you do (such as increased taxes, further from work, etc.) As someone who has moved way too many times, just the thought of moving and the work of doing it is a big negative. The math that needs done at the beginning of the thought process of whether or not to move has to do more with why move than the finances of it all. I too feel like if you can't afford a15 year mortgage, you would be too close to the line with a bigger mortgage. What else would you have to skimp on to do this?

[debtfreeme]

new house?

I guess before I answer I would need to know why you need a bigger, newer house?

Having kids? parents moving in? house falling down so it makes sense to move and buy bigger and newer?

I'd stay where you are and make reasonable changes to the house as needed.

Notice I say needed not wanted. Why do you need to expand the size of your house? Same question as above: kids? parents moving in? Trying to stay up with the Jones and neighbors?

[Mesem]

Depends upon you or why you plan on buying a new house.

[dawnwes]

I am in my mid 40s. No way I would get a 30 year mortgage. We have a 15 year and it is comfortable. You don't need a bigger and better house, you just want one.