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Should I buy another home at $250,000,00 and rent out my current home for $1200 per month?

I'll be 62 this year and receiving my pension of $1500 per month due to being retired after my job closed down. I'm now working out of my home doing child care, making between $480-$560 per mo. I have an IRA at $87,148.00 and my 1st mortgage is $67,000.00 at $470 per mo & I also have a $31,000.00 annuity with another company. Also regular savings from another bank at about $250.00 and I plan to apply for my SS at age 62, at another $800-1500 per mo..

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  Answers  |  1

August 18, 2015

Thanks for the details on your current situation. While they're helpful, I have to wonder if you're prepared to assume the monthly expense of a $250K house, compared with your current home which has a minimal payment and balance. In order to obtain a mortgage, your debt ratios will typically need to be no more than 45% of your gross income, and future income (plan to apply for SS) is not eligible for qualifying purposes. Remember, if you apply for SS at age 62, your monthly benefits are substantially reduced versus retiring at 65. From what you've said, it appears you would be stretched pretty thin on that house, even if you have the rental income (which doesn't always happen as planned), child care, and pension income. I'd seriously encourage you to crunch ALL the numbers, including all monthly expenses, not just those on your credit report, before pursuing such a significant expense. The last thing you want to do is put yourself in a financial bind and endanger all you've worked for these years.

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