New mortgage possible while in retirement

Q. My wife and I are in our 70s. We want to buy a small home just for the two of us, but we don't want to break into our retirement investments to do it. Is it possible to get a mortgage at our age? I think we have good credit. We are both retired.

A. Age is one of the protected classes covered by state and federal fair housing laws. Lenders may not discriminate on that ground. They may not even ask how old you are.

Like any potential borrower, you'll be judged on whether you have a record of paying bills promptly, how much other debt you're currently carrying, and whether you have sufficient dependable income to handle the proposed housing expense.

Income from Social Security and retirement funds will qualify just fine.

Q. My wife and I are part-time real estate investors who purchase and remodel houses and small multifamily buildings. We find it extremely difficult to compete with full-time investors and speculators when trying to find bargain properties to purchase. Obviously, it is difficult to make a profit if properties are purchased from real estate brokers at retail prices.

What is the best method for finding bargain property? Are there any publications you could recommend that tell how to find good buys?

A. I have to disagree with you. Real estate brokers are a good source for bargain properties. Every now and then, they come across distress situations, involving owners who must sell quickly at less than market price, or who don't want to bring property into condition for a normal sale.

Your best bet is to cultivate several brokers. Lots of people tell brokers, "Let me know if you ever find a good piece of income property" and are never heard from again. To hold the agents' attention and show you mean business, contact them regularly, emphasizing that you are willing and able to move promptly when they locate something for you.

You can also follow foreclosure sales, which are advertised in the legal notices. Buying those requires some skill and prompt cash, so many professional investors have a line of credit all set up before they bid.

Q. In the next few years, my husband and I will probably both be retiring. We still have a mortgage on our house. It would be nice to have it all paid free-and-clear when the salaries stop. We were thinking about paying it off. But I've been told that if we decide to downsize, not having a mortgage will make it harder to sell the house. Do you have any information on that?

A. Many years ago, all FHA and VA mortgages were "freely assumable," which meant that anyone who bought the house could take over the existing loan. Buyers wouldn't have the fuss and expense of placing a new mortgage. In addition, an assumable mortgage attracted would-be homeowners who couldn't qualify for loans on their own. In those days, a large assumable mortgage was definitely an asset, and it was usually mentioned prominently in ads for the property.

That's probably why you heard what you did about the value of keeping a loan out against your house. Freely assumable loans, though, are pretty much a thing of the past. These days, prospective buyers won't pay much attention to whether you have a mortgage or not.

I don't know how much extra cash you have, how large your mortgage is, and whether you're paying old-fashioned high interest or have refinanced at today's low rates. But let's assume you're paying 6 percent interest.

You have the opportunity for a terrific investment, something that will pay a guaranteed 6-percent return. These days that's a fantastic yield. And it's no-risk. For every extra dollar you send to the lender, clearly marked "to be applied to principal reduction," you'll save $6 a year from then on until the loan is completely paid off.

Q. I heard different things about points. Is it only when you make a down payment or do you earn any over the years?

A. I'm afraid you won't get any free airline flights with mortgage points. Each point is one percent of a new loan being placed, and you pay it to the lender just once, at the closing. Sorry about that.

• Edith Lank will respond to questions sent to her at 240 Hemingway Drive, Rochester, N.Y. 14620 (include a stamped return envelope), or readers may email her through askedith.com.

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