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dowdyl

20 Year Loan At Age 60

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Jumping in late. I am a retired financial planner. I traded my '04 Southwind 36E on a Workhorse chassis for a 2012 Phaeton 36 QSH DP in May. I had cash to complete the deal, but was offered 3.9% 20 year financing. Oh, DW and I just turned 70! After a lot of thought and consulting with the planner who bought my practice, I decided I was making more on the funds in the market than the net cost of the loan so I took the loan. Of course the dealer came back with a higher rate :rolleyes: so I told him I was uninterested as the numbers didn't work. Amazingly, 30 minutes later he had the loan from my previous lender, Bank of the West, at the rate he had initially offered.

Just because you can afford to pay cash it doesn't necessarily make sense. For the record, my accounts are up 12% for the year and after taxes that sure beats 3.9%. There is no promise that I will always have better return than the cost of the loan, but I can prepay at any time the return is less than the cost. At 3.9% tax deductible it would take several years of rotten performance to be behind.

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I'm 70 and I just purchased a new motorhome. We have owned motorhomes since 1984. I figure we have at least 10 more years of RVing. Our last MH was a 2006. There are so many great improvements since we bought in 2006 We took out a 20 year loan for two reasons, the interest rate was much better, and the monthly payment was lower. We plan to pay off the loan in about two years. We use our MH regularly and we enjoy the lifestyle so it is worth it to us.

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I am 68 and just took out a 20 year loan to buy our new motorhome. I have no intentions of taking that long to pay it off as I am making four payments a month but if I hit a month that I need extra cash then I can just make the one low monthly payment and catch up the next month. I figure it will take me about 5 years to pay off the loan unless I have some unexpected expenses.

Between my wife and I we currently get 6 retirement checks a month. I have retired twice once from the military and once from civilian aviation plus SS plus VA disability and my wife gets her SS plus her retirement. Life is good.

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We're a little scared of buying used (never know what you're going to get and it's a big commitment), however, would consider it if one owner, low mileage, good price, and getting an extended warrenty. We're planning a trip to Yellowstone this fall and not sure if the park can accommodate a big rig or better to stay at a campground outside of the park. Also, during the fall would you recommend reservations along the way or do you think we'll be fine because we're travelling mid-September to early October.

If you are planning to go I would be trying to get reservations NOW. The campgrounds go fast in the park. We stayed out side the park on the north side on 89. Yellowstone's Edge RV Park, 3502 US-89, Livingston, MT 59047, mtrv.com, (406) 333-4036.

All the parks are busy during the season. We find it best to stay outside the park and drive the toad.

Bill

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I hearer to many people brag that they paid cash. Well bless their harts that may not be the smart way to do it. But they can impress people who don't know that they paid cash. ;)

Bill

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At 60 years of age, we're thinking of trading our 2006 32' Southwind Fleetwood motorhome for a diesel pusher. Is it insane to even consider this at our age? How do others handle this? I'm still working but plan on retiring in another 5 years.

dowdyl,

You know your finances better than anyone and I presume can manage them as appropriate. Obtaining a loan at age 60 is just a number in my opinion and there is no fault in getting a 20 year loan. Our last RV loan was awarded to us when I was 59 years of age and it is for 20 years. I had retired at age 57 and my wife was one year from retirement.

Respectfully, if that is what you are thinking about now that you are still employed, consider all the parameters and make the appropriate decision that's best for you and your family. Hopefully, you are in good health and will be able to enjoy life to its fullest if you decide to "go for the 20 year loan."

Best of luck in your decision making.

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The original posting was made in February 2012 so any questions dowdyl had have been settled by now.

Regarding the original question, there are strategies that can help with any loan of this type. Dowdyl was working at the time and had five more years of anticipated employment before retirement. Since the early years of a loan the payments are mostly interest with little principal paid, it is possible to cut the loan period down by making additional payments. On a 20 year loan at today's 4% rate, almost 60% of the initial payments will be interest so it only takes an additional 40% of the monthly payment amount to, in essence, make two payments while at the same time reducing the amount of interest paid on the loan. Doing this for the 5 years he was working would leave him with just ten years of payments at age 65. If you size the loan (select a rig you can afford) so that you can do this while working, you leave yourself able to drop back with the payments upon retirement and still have just ten years left to pay off the loan.

When taking a loan you should always consider the rate your savings and investments are paying. If you had money in a savings account today at an interest rate of a fraction of 1%, you would be better off putting that money down on the purchase. It would be like getting 4% interest on your money because you would be saving 4% on that amount in the loan. If your investments are paying you 5% or more and you are certain they will continue at or near that rate then take the loan. A 4% loan would leave you with a net 1% difference in your favor on 5% investment returns.

One other factor always involved with financial decisions that I haven't seen mentioned is the sleep factor. Everyone has their own comfort level with savings, investments and loans. If taking out a large loan for an extended period of time puts you out of your comfort level, you may worry about it constantly. If issues like this wake you up or keep you up at night, you should reconsider the decision. Part of enjoying the benefits of owning a motor home include being able to sleep soundly at night!

One additional note. Upon retirement, we sold the house and bought the motor home. The proceeds of the sale of the house were the down payment on the motor home. We eliminated the costs of maintaining a home in addition to reducing the cost of buying and owning a motor home. This significantly changes the financial picture when making a purchase at or near retirement. Not everyone is able to part with the sticks and bricks home but if you can make the break and still sleep at night, it can be very beneficial from a financial standpoint. When we lived on the road, we experienced a freedom that is hard to explain to those who have a house. Suddenly, time becomes a tiny fraction of decision making when traveling.

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Like a few of you seniors, I'm thinking of financing a motorhome. I'll be 73 on my next birthday and plan on RVing for a few more years. My plan is to pay 25-50% down and finance the rest. Unfortunately, I'm finding that most lenders are not interested in financing used RV's that are more than 7 years old. While I could easily qualify for a newer entry level diesel, my preference is for a high end coach that's 10 or more model years old. The ones I like are selling for $60-90,000 and up. But even with a large down payment, I'm concerned that I won't be able to finance the balance. From what I read, lenders are looking for larger, long term loans. I'd be looking for a smaller short term loan. I have good credit, no debt and a decent pension. It's hard to imagine lenders not lining up for my business. Except for my age, I'm sure I could qualify for a loan on a $200,000 motorhome. However doing so would place my DW at risk. I've come across too many widows trying to unload a motorhome that was financed and is significantly under water. I would not want to put my wife in that situation. So if I can't come up with financing, I'll be lowering my sights to a late 1990s 1 slide diesel with a bunch of miles. I've seriously thought of that since I really like the older luxury coaches. However I'm a retired pencil pusher and don't like the prospect of ongoing mechanical problems. I would appreciate any info on lenders that I might approach.

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