[quote=flu][quote=no_such_reality]Good point about the interest deduction flu on the rental.
For some there’s great comfort in paying off therimary. I also agree with HLS reasonable debt at reasonable rates is prudent as long as you don’t gamble.
You can lock up your money in equity or use it as the down payment for a small apartment building in a nearby state with a 7-10% cap rate.[/quote]
I totally agree. If you are able to pay off your primary and have sufficient reserves left over to pay for other things in retirement, you really can’t go wrong with the approach you take, and its a matter of personal preference imho. The key I think is as you head into retirement to try to pin your living costs and make them as fixed and consistent as possible. Fixed mortgages can do that if your income streams are more or less fixed. Or if you don’t want to deal with the pita factor of tenants, perhaps sell or 1031 exchange into a primary. I am trying to figure this out so who knows what strategy is optimal. I think I am just trying not to majorly screw this up.
The other thing about being old and retiring is if you sell and buy another property of equal or greater value, you can keep your old property tax rate. So if you had your primary since 1980 like my parents did, then your total property tax on a very nice single family home is probably less than 2 months of rent people pay on a 2 bedroom condo. And I believe if your kids end up inheriting those properties, that property tax rate continues.Prop 13 is just great. That probably is also one of the reasons housing inventory is staying low. Net of doing a house exchange is doing nothing to the inventory.[/quote]
I have posted on this board dozens of times that Props 13, 58 and 193 are the sole reasons for the dearth of available inventory in CA’s most established areas and this dearth of inventory is most pronounced in the most valuable and desirable areas of the state (i.e. mostly coastal). I’ve also posted here repeatedly that Props 58 and 193 have allowed the original Prop 13 benefactors (from 1978 forward who still own same property today) to pass on their base year assessment (as far back as Sept 1975) protected by Prop 13 (plus 2% per year of ownership) on into perpetuity.
So the subject of “inheriting” a CA property with ultra-low property taxes in accordance with Prop 13 is old news. There is currently little to zero incentive for any CA “heirs” to sell free-and-clear property of a deceased parent (or grandparent, if their parent is deceased) when it costs them practically nothing to keep it and occupy it themselves or rent it out forever. The negative ramifications of Props 58/193 are enormous to this state’s coffers as well as exacerbating an already very-tight housing market in CA’s most expensive coastal counties and will continue to do so as long as these sections are still on CA’s books.
As the years roll by, state, county and city coffers suffer more and more as longtime property owners (esp those whose families owned valuable coastal residential and commercial properties prior to Sept 1975 and someone in the family still owns those properties today) pay annual property tax on an assessment equivalent 1/8 to 1/10 of today’s actual market value of said property! In legally being allowed to do so, the “rich” get richer and the “poor” and “middle class” get poorer. For all of the above reasons (as well as the grossly unfair inequity of assessments from neighbor to neighbor on the same street), I believe that Props 58 and 193 should be repealed and the sooner, the better. If that happens, the effects of Prop 13 will eventually die a natural death.
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For whatever reason, flu, you appear on this (as well as the “landlording in San Marcos”) thread to be averse to ARMs. Could this possibly be due to all the “good ones” disappearing before you purchased your first property?
Not ALL ARMs are volatile. My payment on my OWN current ARM has fluctuated up or down (up as often as down) between $0 and $43 month (mostly $3 to $7 month) in the past 8 years. Even before that, it only fluctuated up to ~$77 month (up or down) and as little as $11 mo. My ARM has been fully amortizing every month since I took it out. COFI ARMs have historically been very stable and available only to ALT-A and prime borrowers and were all mostly in-house (portfolio) mortgages offered by commercial banks, mortgage banks and S & L’s. I’ve had three of them in my lifetime and actually would consider another smallish one (10 yr) as partial purchase money on a “retirement” home if they actually still existed with the good terms they once did.
The problem is that after the “mortgage crises,” all the “good” ARMS disappeared from the market. The ones now left have have much less desirable terms in the form of higher margins of 2.75% to >=3.5% (the old margins were originally about 1.75% and later reached 2.5%). The newer ARMS also had/have ultra low “teaser rates” lasting a year and then built-in interest resets (not necessarily closely following a particular index) in increments in the early years of the loan (1 yr, 3 yrs, 5 yrs, etc) to prevent neg am in the later years of the mortgage. These *newer* ARMS also typically have annual caps set at a percentage of the (old) payment instead of a percentage shown in the form of an “interest-rate hike” (i.e. max of 2% per year with a life cap of 10%) and the 3-4 payment choices every month of the old ARMs in the first five years have been taken away. Of course, an annual cap of a percentage of the payment (a common one in recent years has been limited to 7.5% higher or lower than the old payment) is easier for Joe and Jane 6p to understand, but suffice to say, this sleight of hand benefits the bank more than the borrower on a COFI ARM.
The PTB evidently took a “paternalistic view” of mortgage holders in about 2007/08 and decided they were ALL too ignorant to “responsibly handle” an ARM over the long haul. The result is that ARM offerings on the mortgage market have been severely curtailed in the past 7-8 years. Hence, millenials (and even some younger Gen X) do not really understand how ARMs work and are thus afraid of them. The older, sophisticated longtime ARM borrowers (such as myself) ended up being painted with the same broad brush as all the whining “victims” of the “mortgage crisis” who bought more house than they could afford as well as used their primary residence as an ATM.
I believe FIH posted somewhere on this forum recently that he has held a COFI ARM on a SD property since 1989 (now has ~3 years left of pymts). flu, why don’t you ask HIM why he has never refied his (now 27 yo) ARM? Better yet, ask YOURSELF (and be honest!) why he (or I) should refi? There are built-in annual caps on COFI ARMS (as well as other types of ARMS), and even so, I have never, ever had an annual cap result in neg am on any of my ARMs.
Unlike you, I haven’t paid to refi (or refied at no cost [cash out?]) and re-started the mortgage on my principal residence at 30 or 15 years over and over again, as you have posted here numerous times over the past ~9-10 years that you did. That’s great if YOU think it was wise to do so (only to retire your primary mortgage just months/one year from your last refi?) . . . but as NSR suggested here, I’m not a gambler.
flu, I would ask YOU, “What is the point of all those machinations (from ~2006/7 forward?) if you were just planning on paying your residence off early, anyway? How many years elapsed from the purchase of your primary residence and its final payoff? And how many refis (incl cash-outs)/HELOC/2nd TD, etc transactions took place against your residence in the ensuing years?”
I’m not judging you, here. I’m just saying that not everyone lives the way you do, makes the same decisions you do or thinks the way you do. Whether or not I could have actually qualified to refi during my ~15 years of ownership of my latest residence is immaterial to your central argument on this thread recently railing that I should have refied my current mortgage.
Even if I had had a consistent and easily verifiable (W-2) salary at any given time, I would likely not have ever refied. I don’t care for the hassle, the credit inquiries, the employment inquiries, the starting-all-over at year one, having to pay an out-of-area lender due to having my loan sold immediately after loan closing and dealing with a bunch of “garbage charges.” Portfolio lenders, which are far and few between these days, didn’t have any garbage charges and kept all their loans in house (as were their underwriters) and thus escrow officers loved working with them.
flu, you’re a “self-professed math whiz.” Can you tell the Piggs, if, in hindsight, you feel it was “worth it” to continually refi/take out a 2nd TD/HELOC your primary residence only to turn around and pay it off months or a year after your placing your last encumbrance against it?
I have frozen my credit at all three credit repositories (for identity theft/fraud protection which has become rampant in my area in recent years). I haven’t needed to apply for any loans since I bought my current residence, I have all the credit cards (4) I want or will need for the rest of my life and have had them for years (even decades) and have refused all offers from my CC companies to raise my credit limit.
Since I don’t need any credit, I may never “thaw out” my credit reports. If I do, it will only be for ONE repository for less than a week (for a lender of my choice to peek at it) and it will be re-frozen forthwith.
My FICO score at the time of freezing my credit reports was 811 – 822 (851 “Vantage”). It’s going to stay that way because nobody can even see them but me (and any of my current creditors), much less use any of my credit or open accounts in my name by successfully assuming my identity.
I like my life simple that way.
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And the second topic you discussed over in the “landlording” thread is NOT about Prop 13. It is about Props 60 and 90 and some of the bolded gibberish you posted over there (copy above) is false and/or misleading and omits important information for the reader. Again, it is clear that you did not do any research before posting. I’m replying to it here (on this now decimated thread) cuz I don’t want to further hijack ldub818’s thread.
Your parents would have to have had a lower purchase price on the home they bought within two years of selling their home they purchased in 1980 (purchase price of new home lower than sold price of orig home).
8. What does “equal or lesser value” of a replacement property mean?
The market value of the replacement property as of the date of purchase must be equal or less than the market value of the original property on the date of sale. The meaning of “equal or lesser value” depends on when you purchase the replacement property. In general, equal or lesser value means:
100% or less of the market value of the original property if a replacement property were purchased or newly constructed before the sale of the original property, or
105% or less of the market value of the original property if a replacement property were purchased or newly constructed within the first year after the sale of the original property, or
110% or less of the market value of the original property if a replacement property were purchased or newly constructed within the second year after the sale of the original property.
In determining whether the “equal or lesser value” test is met, it is important to understand that the market value of a property is not necessarily the same as the sale or purchase price. The assessor will determine the market value of each property. If the market value of your replacement dwelling exceeds the “equal or lesser value” test, no relief is available.
A homeowner or group of homeowners … (HWJT or everyone named on the original deed) can only avail themselves of Prop 60/90 once in a lifetime If a married couple (HWJT on deed) takes advantage of Props 60/90 and one of them dies while they reside in the newer purchase, then the survivor cannot take advantage of Prop 60/90 ever again. Only ONE of the owners on title has to be 55 years old to take advantage of the base-assessment transfer but doing so prohibits any of the other owner(s) on the deed (whatever their age) from ever taking advantage of Prop 60/90 again. The new (lesser valuable) home would have had to have been purchased in the same county as the old home (Prop 60) OR purchased in one of ten CA counties which qualify for Prop 90 base assessment transfers:
What is the difference between Proposition 60 and Proposition 90?
1. Proposition 60 allows transfers of base year values within the same county (intracounty). Proposition 90 allows transfers from one county to another county in California (intercounty) and it is the discretion of each county to authorize such transfers.
Currently, the following ten counties in California have an ordinance enabling the intercounty base year value transfer:
Alameda
Los Angeles
Riverside
San Diego
Santa Clara
El Dorado *
Orange
San Bernardino
San Mateo
Ventura
Since the counties indicated above are subject to change, we recommend contacting the county to which you wish to move to verify eligibility.
* Please note that El Dorado County’s ordinance is scheduled to sunset on October 1, 2016, unless the El Dorado County Board of Supervisors takes further action.
One cannot use an investment property (which has NOT had a $7K homeowner’s exemption attached to it in the past two years) for a Prop 60/90 transfer of its base value assessment.
Do I need to be receiving the homeowners’ exemption on my original property when it is sold?
17. No. The original property must be eligible for the homeowners’ exemption because you own it and because it was your principal place of residence, either
1) at the time of its sale or
2) within two years of the purchase or new construction of the replacement dwelling.
If you did not have the homeowners’ exemption on your property, you may need to provide documents to the assessor that prove it was your principal place of residence. Proof of residency may include voter or vehicle registration, bank accounts, or income tax records.
In addition, one can’t deed their longtime residence to their kids or a spouse/soon-to-be former spouse (in settlement) thru any kind of an intrafamily or interspousal transfer deed (so the grantee can avail themselves of the grantor(s) spouse or parent/grandparent’s base assessment) and then turn around and use that “transfer” (NOT “arm’s-length sale”) for making application for a Prop 60/90 base assessment transfer for their retirement home.
2. I am over 55 and planning on selling my long-time residence to my child. Can my child benefit from the parent-child exclusion and can I also transfer my base year value (Proposition 60) when I purchase a replacement property?
No. You must choose which exclusion you wish to apply your base year value. If you sell the property to your child and choose to transfer your base year value using the parent-child exclusion, then the base year value is no longer yours to transfer to a replacement property.
In short, Props 60 and 90 weren’t written and passed to enable a CA homeowner who is still residing in their longtime principal residence to step up their lifestyle in retirement, but was instead intended to allow the homeowner to downsize to a less-valuable home and keep their old assessment. The devil is in the details, folks. If it wasn’t, every . single . longtime . CA . homeowner (or partial homeowner) would be attempting to use the measures to justify property tax relief on just about every property in existence as well as attempt to have their cake and eat it, too (ex: “sell” their residence for pennies on the dollar to a relative and then transfer its base-year assessment to another residence) :=0[/quote]
BG, WTF are you responding to? I swear, do you have dementia or something?
I’m not going to spend my time reading this long ass post you just made. If you have a cliff notes version, please post that version instead. Cliff notes are great. I got through AP english reading cliff notes for novels that I didn’t want to waste my time over so I could spend more time on the subjects I liked. And cliff notes has been my guideline at work when someone wants to write me a long ass 3 page email detailing me about a problem which can be summarized with 5 bullet points on a status report to my VP.
I’m not sure why you are talking about Prop 13 on this thread, because this thread is about mortgage brokers/lenders and recommendations, with the first order of hijack about expertise in mortgages.
I think you’re talking about Prop13 now. I’m not sure why (again I didn’t read that long ass paragraph). I’m not sure how this is relevant to the OP’s original request of asking for a mortgage broker’s referral..
Then, I thought you might be responding to my inquiry as to why you haven’t refinanced yet. And I only brought that up because apparently you jumped into this thread about mortgages, stating you aren’t very popular around here because you say things that are to the fact, even if it rubs people the wrong way… to which I corrected you..that absolutely not…people aren’t responding to your posts in the way they respond not because they don’t like you (well, at least until it because evident on that one thread about UC schools that you are a racist, and then it was only for that thread)….People respond to most of the rest of your threads about finance and real estate, because what you post is completely wrong and not factual at all.
And here we are with your long ass post about Prop13, which has nothing to do with either (a) a recommended mortgage broker/lender or (b) rebuttal as to why you haven’t to refinance your 30 year 3.66 ARM when 15 year and 10 year FIXED mortgages are much cheaper, or why you haven’t paid off your home if you say you can, despite in other threads you complaining about the low returns of 1%ish CD’s.
I mean, seriously, have you taken a look back and seen what you post, where you post it, and can’t you see how comically hysterical this is? I’m laughing my ass of here because I have no idea why you are talking about prop 13 in this context, and you must of spent considerable amount of time writing that previous dissertation on prop 13.
BG, though I’m definitely not “overstressed”, if had to choose between being overstressed of dementia, I’ll take overstressed for the win please.
