Financing in Retirement

[Rewillia]

Seeking advice/input from fellow retirees;

My wife & I are retiring next month and plan to purchase a late model diesel pusher.

We are fortunate that we have the money to pay cash for the DP but our FSP is recommending we finance it in order to keep our own money invested and given that we can write off the loan interest as a 2nd home tax deduction.

Why we want advice - Some people we have spoken with tell me us it may be "challenging" to get financing in absence of having a steady income stream, i.e no paycheck coming in and irrespective of our financial status (We have credit scores in the high 790's-low 800's and our savings and investments are substantially greater than the amount we plan to borrow.)

Can you share your experience - Wondering if others here have experienced any problem getting financing in absence of having a steady income stream (no employment/paycheck)? If yes, please explain what you had to do in order to get approved for your loan.

Hope this was clear enough... meanwhile thanks.

Rick

[blakeloke]

Rick,

Welcome to the Forum and congratulations on your upcoming retirement! My wife and I recently retired and we are enjoying it immensely.

Just to qualify my response.....we haven't yet tried to obtain a loan (post retirement) but don't think you would have an issue given your assets substantially exceed what you are intending to borrow.

I'm not a Financial Planner/Advisor but really question the advice you were given. In today's current market it would be hard for me to think that personal investment growth would exceed interest rates on a used motorhome. I understand there is a tax offset that you are able to itemize and that should factor into your decision.

I'm kind of a pessimist when it comes to personal finances and question/research everything our Advisor says to us. To date he has been forthcoming and seems to have our interests in mind when it comes to fiduciary responsibilities. For example: we are in the market to purchase some property and perhaps relocate to a different area. When asking him about how to pay for it his response is that let's look at it when you've decided. If you can get an interest rate that is lower than what realistic market returns are then by all means secure a loan. If not, pay for the property in cash.

I put some trust in that statement because if we do pay cash......he has that much less of our $$s to work with which in turn means less income for him.

Blake

[hermanmullins]

Rick,

If you plan on financing a coach then if you can put off retiring for a few months.

This way it will show that you have a steady income. After you obtain the loan then retire. They are not allowed to ask your age or if you plan on retiring soon.

Good luck which ever way you decide go.

Herman

[tjb201]

We are retired AND full time Rv'ers with only investment income as income, no retirement income from SS or pensions. We had to put 50% down in order to induce the lending company to finance our purchase of a new Tiffin. That said, we got a 20 year loan and a competitive rate. Our lender is Bank of the West.

Tim

[jlandon13399]

Bank of the West is our lender also. We are retired and had no problem securing financing. Your credit score and total retirement income will mean a lot when it comes to credit.

[RodgerS]

Here are my thoughts.

Your best buy for a motorhome will be a well-used premium motorhome like a Newmar, Country Coach, Monaco, etc. I'm talking about 10+ years old.

Financing that will be difficult as those purchases are quite often part of the cash market.

But you can easily buy a premium used dp for 80k to 120k much more or much less.

Now compare that to buying a dp for say 225K or more, probably entry level quality, using a down payment, and probably going upside down on your loan at some point.

Just remember that most investments are not guaranteed to generate earnings and gains.

I have read many threads written by owners of diesel pushers that highly value their paid for dp and have no plans to buy up.

Give that some thought.

The key question is do you have the skills to maintain the home part of the mh and inspect the mh? And also are you willing to pay for one of more of the following: diesel mechanic, chassis mechanic, mh inspector as needed. If you don't have skills are you willing to train yourself up before you buy? And are you willing to budget 10 to 20K to upgrade your used coach, pay for new tires, etc.

I think your decision is going to be what works for your situation and your comfort zone, and no amount of what others would do can be a reliable substitute for your situation.

A mh is not a financial investment, but is an entertainment, money hole that rapidly and severely depreciates if you are close to new or late model.

You can write off your interest, but it is not a dollar for dollar write off and your financial advisor makes money keeping your money tied up.

If you buy at a dealership, the salesman often earns a financing commission.

[huffypuff]

I'm 4 years into a loan with the Bank of The West and there is problems with a loan if you want to trade later. I found out that the motorhome depreciate faster than the loan principal. As it can retail for more than I owe, trade in value is $21,000 less than I owe. The dealer upped the offer so I only lose $14,000 since my coach is in such nice shape but not worth the loss to me. For a dealer to look me in the eye and tell me he will sell my coach for a $30,000 profit for the dealership is unbelievable. This is all backed by NADA.

The problem is financing 15 or 20 years you will find the loan upside down like mine is. In my case I took a 15 year loan with $20,000 down and this what happens if you need to past the coach on. We didn't think we would need to get rid of it as we always thought we be healthy enough to use till the term is over.

This is something else to think about if you get a loan.

[RodgerS]

HuffyPuff,

It seems unbelievable, but is actually quite reasonable from the dealer's perspective. That is why many owners try to sell the mh as a private owner sale to maximize the selling price.

The dealers make a judgment as to the potential for selling a particular used unit. They really prefer consignment because they can basically not put any repairs or services into it (some dealers do = exception) until they sell it. They don't have to tie up any financing dollars either = flooring.

If the trade-in unit doesn't sell within a reasonable period of time, they know they have to move it or take an even bigger hit later. The way to do that is to reduce the price significantly. They need a pretty good margin so they can make at least a minimal profit if they misjudged the market for your trade-in and have to kick it loose. If they made a good judgment they make a darn good profit, which helps to make up for some of their mistakes.

If there are any astute buyer/owners in this industry, my personal opinion is they come in the following flavor:

1) they almost always buy used. One unique exception being experienced full-timers that really want a new coach and know exactly what they want and will keep the coach for a very long time.

1a) tend to buy for cash if they can.

2) they do most of the repairs and maintenance themselves and don't rely on warranties.

3) they mostly buy premium used dp units - basically the high-end but not the super bling stuff.

4) and they know a lot about the quality below the surface.

5) the five most important factors are the condition of the chassis including the engine, there are no water leaks or water damage, the condition of the chassis including the engine, there are no water leaks or water damage, the condition of the chassis including the engine.

6) they know to get the coach inspected thoroughly and don't get emotionally tied up in the buy or sale.

7) and they keep 15 to 25k or so cash on hand to deal with the unexpected and make repairs and upgrades.

Just my un-humble opinion.

Yep, that is what I think, but no, that doesn't mean I won't buy a new dually and a premium used 5th if I decide that is what will work for me.

[obedb]

I use an iPad so on this site I don't seem to be able to post a hyperlink or pictures. Type this link into a search window for some worthwhile info on the thread topic. ( rv-dreams-journal.com ) Remember you are not buying something that will hold it's value. Look at Ray's (huffy puff) plight. In our case, we are debt free so I take the standard deduction instead of filing a schedule a. The few deductions we do have don't justify itemizing. We paid cash.

Maybe I will dust off my Lenovo laptop.

[obedb]

Ray/. Payments in the earlier years of a mortgage on a house or an RV loan or a car loan are mostly interest. Significant principal pay down comes later. Most commonly referred to as add/on interest in the car business. Probably about the same for an RV after all it has wheels on it. Typically a $100,000 home mortgage for 30 years takes 15 years just to get the principal down to $50,000.

As young marrieds, when we could afford it, we mailed in a larger check with our payment coupon and the extra was applied to the principal. Had our thirty paid off in twenty. Don't know if it still works that way, or if you could do that with an RV loan.

[Rewillia]

I appreciate all the members' input here to my question on obtaining financing in absence of a steady-state income, i.e paycheck.

I suppose I could have provided more info on the principle of the matter. Working with our FSP, we will be;

1- paying down 50% of the total cost of the DP when we purchase it

2 -securing a loan for the balance that has a maximum term of 10-years

3- establishing a special financial account that the monthly payments will be made from, i.e. ACH direct draft

4- ensuring the loan we get will allow additional annual principle (only) payments as well as early payoff without penalty

We were just wondering what others here who are retired and have obtained financing in absence of monthly paycheck had encountered when seeking to find their loan.

We're planing on purchasing a one owner, slightly used low mileage 13'-14' Newmar King Aire 4593, Essex or American Coach - Heritage 45T and want to do so from a private seller/owner if possible. We will not be purchasing a new coach.

[RodgerS]

I assume your intended use is recreational and/or full-time.

One comparable "high-end luxury" coach I'm familiar with is owned by a winery in Napa, Ca and is used in their marketing efforts of the business and the owner's name...not really a recreational or full-time vehicle. In that case, financing makes more sense to me and is easy to finance through the business.

Your professional paid advisors should be the ones you rely on. They will certainly find a way to obtain financing for you.

Actually, now that you have provided more information, it would make more sense to me to buy a new coach and take advantages of the new financing options that would be available to you and the new coach warranties.

[Rewillia]

I assume your intended use is recreational and/or full-time.

One comparable "high-end luxury" coach I'm familiar with is owned by a winery in Napa, Ca and is used in their marketing efforts of the business and the owner's name...not really a recreational or full-time vehicle. In that case, financing makes more sense to me and is easy to finance through the business.

Your professional paid advisors should be the ones you rely on. They will certainly find a way to obtain financing for you.

Actually, now that you have provided more information, it would make more sense to me to buy a new coach and take advantages of the new financing options that would be available to you and the new coach warranties.

Solely recreational, 6-mos per year on the road. Not going to buy new.

[RodgerS]

I'm curious why you decided to focus on a used Newmar King Aire 4593, Essex or American Coach - Heritage 45T, because after two years of extensive research I would find it very easy to make an argument that a new Newmar Dutch Star, among several other candidates, would seem like one of several perfect, in general, coaches for a solely recreational, 6-mos of the year user. This assumes you will be moving the coach on occasion and you want to stay in luxury private campgrounds, since you are focused on a 45 foot luxury coach.

I mention the Dutch Star because Newmar was one of your options and build quality is about as good as it gets and is very luxurious. At this level and complexity of a coach being considered, there is real value in a new warranty and depreciation would seem much less relevant to your financial and recreational situation, even irrelevant. My comparison would be to the experienced full-timers who sometimes buy new and simply want to hold onto the coach for a very long period of time and buy full-optioned coaches, knowing full well what is needed for their full-time living comfort. Sometimes they sell their homes and pay for cash, and sometimes they take on a loan.

As to myself, I'm an odd man out. I plan to stay in one location for a long period of time, with some traveling to get to that destination. I also like the idea of a new running gear pulling a used 5th with a great kitchen I can feel comfortable cooking in. I also, having had a short stint for three months fixing rental motorhomes, have a bit of an aversion to a bus-like setting. So I'm not one to advise you, really. You should listen to the highly experienced owners and follow your own star.

[manholt]

Rewillia.

I retired in Feb of 1985 at 42 years young! My first RV, was a class "A", 1967 Winnebago in 1967! $6,800 cash at the LA, CA. Auto show. As the years and different models of new and used Class "A" came my way, I have paid in 2 ways, both depended on what I made in interest vs. what the bank charged in interest! Taken enough out of Savings to buy and then, put up, for collateral (newer a house, land, boat or coach) a CD and let interest make payments or just pay cash!

I worked as a consultant, therefore I could not prove continuity of income. Still can't! Lending institutions are happy if you can prove $3,333.03 per week ! They understand static, not $15,000 this month and $40,000 last month....I have no clue what my "Credit Score" is! Nor, do I care.

Carl

[five]

...I'm curious why you decided to focus on a used Newmar King Aire 4593, Essex or American Coach - Heritage 45T, because after two years of extensive research I would find it very easy to make an argument that a new Newmar Dutch Star, among several other candidates, would seem like one of several perfect, in general, coaches for a solely recreational, 6-mos of the year user....

The Dutch Star is not in the same class as the King Aire, Essex or Heritage. In fact, Newmar does not place it in their "Luxury Motor Coach" section... it is in the "Diesel MC" section.

http://www.newmarcorp.com/

[casuall454]

Rick,

If you plan on financing a coach then if you can put off retiring for a few months.

This way it will show that you have a steady income. After you obtain the loan then retire. They are not allowed to ask your age or if you plan on retiring soon.

Good luck which ever way you decide go.

Herman

The question on retirement and financing from the first question, you have several good responses in the beginning IMHO. It seems prudent to obtain financing if possible prior to you entering retirement and fixed income. In beginning my process of financial review (loan request amount +interest+ time) I used a calculator from vertex42. Although this is supposed to be used for "snow ball" debt reduction. It allows for principal payments, bi-weekly payments, and other one time payments. It simply shows you how you can cut time and interest costs from your loan.

Just because I have a twenty year loan doesn't imply I don't want to pay it off in seven. This calculator shows me how to achieve that goal.

http://www.vertex42.com/Calculators/debt-reduction-calculator.html

Although several lending intuitions will desire your business, best wishes on locating the over all loan package that meets your needs.

[manholt]

One statement that makes no sense to me. "You want to stay in Luxury Private Campgrounds, because you have a Luxury 45 footer"! What does that have to do with the OP's question? FIVE, you're correct.....wondered about that statement also! It also, does not belong to OP's question!

I have not had a problem financing anything as a retiree. I suggest, OP puts the question to their Banker or Broker!

Carl

[RodgerS]

"not in the same class"

Thanks for the Newmar site reference, I have been there many times and I'm aware of their line up. How does that make it a better buy for a "solely recreational, 6-mos of the year user?"

On the other hand, if you are making the argument that since many rv owners are entertainment oriented and that the "class" i.e "status" of the person is important as to who they wish to associate with and entertain, and the RV you choose helps you decide who to associate with and who to not associate with, then I understand your point.

Same issue as not allowing coaches into a park beyond a certain age, etc.

Rodger

[manholt]

Roger.

Your still missing the point.

Carl

[RodgerS]

Carl, my name is Rodger, unless that is part of your point.

à point in French cooking is medium rare, which is to say your point is not "well done."

[five]

"not in the same class"

Thanks for the Newmar site reference, I have been there many times and I'm aware of their line up. How does that make it a better buy for a "solely recreational, 6-mos of the year user?"

On the other hand, if you are making the argument that since many rv owners are entertainment oriented and that the "class" i.e "status" of the person is important as to who they wish to associate with and entertain, and the RV you choose helps you decide who to associate with and who to not associate with, then I understand your point.

Same issue as not allowing coaches into a park beyond a certain age, etc.

Rodger

What I am saying is that comparing a Dutch Star to a King Aire, Essex or Heritage is not an apples to apples comparison. The DS is a very nice coach, but not in the same class as the other three.

[RodgerS]

"Very nice coach" is not an answer to the question...How does that make it a better buy for a "solely recreational, 6-mos of the year user?"

[blakeloke]

RodgerS,

What does your opinion have to do with the original posters question?   You have hijacked this thread with zero practical knowledge of motorhoming and the fun we have with it.

I am not interested in your "court of law" BS.  I'm on here because I really want to gain knowledge from folks that have EXPERIENCE and share mine as well.

Buy your 5th wheel and be done.

Blake

[britcon]

Getting back to the original poster's question,  if you are planning on financing anything - car, boat motorhome.....set it up before you retire so you can show steady income to cover the loan.  In my experience, lenders, rightly or wrongly, do not put same amount of weight when considering wage income vs. investments and pension incomes.  Some will not even consider your net worth in their reviews !

To rodger......not really interested in your biased opinion of purchasing used vs. new, Each of us makes our own decisions based on our personal preferences and financial capabilities.