Should I finance or pay cash for a second home?

Should I finance or pay cash for a second home?
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#1

I’m 64 years old and have a $30,000 pension. I also have $760,000 in a vested 401k and $120,000 in an IRA. I want to diversify into real estate where I can swim, fish, and catch some rays. I have no need for distributions from either account. Since I am not taking distributions my income seems artificially low. I could pay cash for a $350,000 2nd home. Should I finance or pay cash? How do I prequalify for a mortgage in the Bahamas?


#2

It would be short sighted of me to give you an answer without knowing your expenses relative to your disposable income. This would be an excellent time to create a financial plan to make sure a 2nd home makes sense and that you will have enough money to last you through your retirement.
It is not likely that you will find a domestic lender to qualify you for a overseas real estate purchase. The reason for this is a domestic lender does not have the ability to foreclose on the property in the case of default. This means you will have to consider a financing option in the Bahamas. If you are dealing with a sophisticated real estate broker they should be able to guide you.
Before you jump in the water, I would consider renting a property for one or two years. Using VRBO or Airbnb you could even try various properties on different islands. You may find renting is more enjoyable with less headaches.


#3

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