Financial planning for the working class.The question is, how should we finance the house we are buying?Jeff and I are an unmarried couple of 20 years. We are not married primarily because I qualify for a medicaid supplement to medicare unmarried. I have no assets, so when I say "we" I really mean "he”. I'm 66, only income is SS.Jeff is 54, retired with a state pension of 37K and takes a required distribution from an ira
inherited from his mother. Balance of the ira is about 75K.He also has an additional $145k , all in savings accounts and money market accounts. No other investments. (He lost a great deal of his 401K a few years ago, and is very shy about investing.)Jeff owns the home we're in, 57K mortgage, market value about 70K. We are buying a house for 135K. Will sell this one but loan is not contingent upon sale. We could pay cash for the house, or we could take a loan of as much as $101, 000 , 30 yr fixed at 3.7. We'd need to pay 37,700 to close, about 28% of the purchase price. No points, but high closing costs none the less, totaling 3,900. Monthly payment about $675, about $200 of that is taxes and insurance.The big what if:
It seems to me not so wise to take the 30 year loan at 3.7 and leave 110K in savings accounts making about 1% and spending $675 a month for housing. If he bought the house outright, there wouldn't be much in the bank besides the IRA and maybe 10K after selling the house we're in. Basically investing it in residential RE (our home) where is market has been rising slowly but steadily since 2011. [The house we are buying for 135k was last purchased in 2013 for 116K] But monthly housing would be about $200. We generally live within our means, but if we needed money, we could use an equity line of credit , currently running at about 4.5%, possibly paying interest only (or not) for a period of five or ten years and borrowing only as much as we needed. Or in 8 years, he could get a reverse mortgage. [We won't need money when we're dead. No dependents we need to leave it with.] Or, there must be other ways to go as well that we are less familiar with.What is the smart thing to do?