Author Topic: Refinance mortgage while FIRE (no W2 income)  (Read 2562 times)

mrcrabber

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Refinance mortgage while FIRE (no W2 income)
« on: December 21, 2020, 11:45:28 PM »
Hello,

I'm excited to say I was let go from my job this year, and was happy to take a great severance package and dive into not working and living off investments.

I'm looking at refinancing my mortgage, and realizing that most loans are backed by W2 employment or consistent self-employed income.

Does anyone have experience getting a mortgage or refinance backed by assets (retirement or brokerage investments)?

I've contacted a few lenders and it seems they only count retirement savings assets, not assets or investments in brokerage accounts.

Dicey

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Re: Refinance mortgage while FIRE (no W2 income)
« Reply #1 on: December 22, 2020, 12:41:42 AM »
Have you contacted your current lender about a streamline re-fi? Sometimes lenders will do this just to keep your business. There is typically little to no qualifying required.

Mr. Green

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Re: Refinance mortgage while FIRE (no W2 income)
« Reply #2 on: December 22, 2020, 08:15:19 AM »
It was just the opposite for us, they'd only count our non-retirement assets because of our age (30's). Without W-2 income or sufficient assets to pass their same income thresholds we do not qualify for a mortgage of any kind (refi or new business) on our own.

spartana

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Re: Refinance mortgage while FIRE (no W2 income)
« Reply #3 on: December 22, 2020, 01:09:29 PM »
It was just the opposite for us, they'd only count our non-retirement assets because of our age (30's). Without W-2 income or sufficient assets to pass their same income thresholds we do not qualify for a mortgage of any kind (refi or new business) on our own.
Yep same for me. Retirement accounts don't seem to matter if you aren't at traditional retirement age and already making withdrawals from them. Many lenders won't count other investments or savings either.  Just my experience so YMMV.  Same when trying to get a HELOC or when trying to rent. Again just my experience and others here have been successful getting loans or refinancing based on their investment income alone. They probably have higher asset levels and income then I do.
« Last Edit: December 22, 2020, 01:13:00 PM by spartana »

reeshau

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Re: Refinance mortgage while FIRE (no W2 income)
« Reply #4 on: December 22, 2020, 05:49:15 PM »
 I couldn't get a lender to talk to me at all this summer about an asset-backed mortgage, to even show them my assets.   This was for a new loan rather than a refi.  Even tried a few brokers.  They all said that business dried up with uncertainty around Covid, and to try again after things returned to normal.

Of course, I've not asked anyone since August or so.

Goldendog777

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Re: Refinance mortgage while FIRE (no W2 income)
« Reply #5 on: December 22, 2020, 07:24:23 PM »
I was an underwriter for a large bank for many years and if one is trying to qualify using just investment income, our bank used an avg of 2 yrs interest and dividend income that is reported on your last 2 yrs 1040s, as long as it is increasing (no declining income) and you have sufficient assets for at least 5 more years to support that level of income.  Canít use retirement accounts for income unless you are actually taking withdrawals because you are 59.5 yrs old. 

SwordGuy

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Re: Refinance mortgage while FIRE (no W2 income)
« Reply #6 on: December 22, 2020, 08:57:50 PM »
This details my experience getting a new mortgage whilst retired.

https://forum.mrmoneymustache.com/real-estate-and-landlording/morgages-after-fire/


rmorris50

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Re: Refinance mortgage while FIRE (no W2 income)
« Reply #7 on: December 23, 2020, 07:02:58 PM »
This details my experience getting a new mortgage whilst retired.

https://forum.mrmoneymustache.com/real-estate-and-landlording/morgages-after-fire/
Interesting back story to say the least. I recently bought a house and it was smooth sailing with the mortgage cause I have the job. But itís my assets that make me feel secure paying the mortgage, not my job which I plan to fire from sooner rather than later. Also my job feels very insecure for many reasons. Mortgage underwriting is so backwards in some ways.


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2sk22

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Re: Refinance mortgage while FIRE (no W2 income)
« Reply #8 on: December 25, 2020, 03:30:25 AM »
This details my experience getting a new mortgage whilst retired.

https://forum.mrmoneymustache.com/real-estate-and-landlording/morgages-after-fire/

In these kinds of mortgages, does the lender have a lien of some kind on the shares that you are selling?

SwordGuy

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Re: Refinance mortgage while FIRE (no W2 income)
« Reply #9 on: December 25, 2020, 10:48:33 AM »
This details my experience getting a new mortgage whilst retired.

https://forum.mrmoneymustache.com/real-estate-and-landlording/morgages-after-fire/

In these kinds of mortgages, does the lender have a lien of some kind on the shares that you are selling?

Hell to the no.    Couldn't if they wanted to because it was funds in an IRA.

Remember, in the US, they're most likely going to sell that mortgage loan right away, so if I've got good credit and it fits the federal rules, they'll be able to bundle it up with other loans and sell it pronto.

Jack0Life

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Re: Refinance mortgage while FIRE (no W2 income)
« Reply #10 on: December 25, 2020, 01:48:24 PM »
Yeah I found that most lenders won't even look at you without incomes.
I got furloughed but my wife is still working and makes $50k/yr. We tried re-financing with just her this past Aug and tons of assets ~$500K  and they only offer $140k loan, we were asking $240k. Meaning we need to put in another $100k.
My furloughed ended up being laid-off but I got paid for 60 days. As soon as I got my first paycheck, I re-applied again with me and my wife. In process right now. I don't see why they won't approve as my paychecks show $120k/yr. I still might get screwed if they asked for a current paycheck again when we close cause I won't have a paycheck by then. Fingers crossed.

SwordGuy

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Re: Refinance mortgage while FIRE (no W2 income)
« Reply #11 on: December 25, 2020, 06:52:24 PM »
Yeah I found that most lenders won't even look at you without incomes.
I got furloughed but my wife is still working and makes $50k/yr. We tried re-financing with just her this past Aug and tons of assets ~$500K  and they only offer $140k loan, we were asking $240k. Meaning we need to put in another $100k.
My furloughed ended up being laid-off but I got paid for 60 days. As soon as I got my first paycheck, I re-applied again with me and my wife. In process right now. I don't see why they won't approve as my paychecks show $120k/yr. I still might get screwed if they asked for a current paycheck again when we close cause I won't have a paycheck by then. Fingers crossed.

Depending on what you signed, you may get screwed via a fraud offense for trying a fast one on them if they find out.   Some lenders are smart enough to have someone sign a document to the effect that the borrower will notify them of any current or expected changes in employment, income, etc.

Dicey

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Re: Refinance mortgage while FIRE (no W2 income)
« Reply #12 on: December 26, 2020, 07:52:22 AM »
Yeah I found that most lenders won't even look at you without incomes.
I got furloughed but my wife is still working and makes $50k/yr. We tried re-financing with just her this past Aug and tons of assets ~$500K  and they only offer $140k loan, we were asking $240k. Meaning we need to put in another $100k.
My furloughed ended up being laid-off but I got paid for 60 days. As soon as I got my first paycheck, I re-applied again with me and my wife. In process right now. I don't see why they won't approve as my paychecks show $120k/yr. I still might get screwed if they asked for a current paycheck again when we close cause I won't have a paycheck by then. Fingers crossed.

Depending on what you signed, you may get screwed via a fraud offense for trying a fast one on them if they find out.   Some lenders are smart enough to have someone sign a document to the effect that the borrower will notify them of any current or expected changes in employment, income, etc.
In our experience, it's common to be asked for the most current pay stub just prior to closing. I suppose it wouldn't hurt to have some sort of excuse planned in case this happens.  Dunno, say you just got laid off again?? Good luck to you on squeaking by. I'm wishing you the best because I know you have the means to repay the note, job or no job.

Jack0Life

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Re: Refinance mortgage while FIRE (no W2 income)
« Reply #13 on: December 28, 2020, 07:10:45 PM »
Yeah I found that most lenders won't even look at you without incomes.
I got furloughed but my wife is still working and makes $50k/yr. We tried re-financing with just her this past Aug and tons of assets ~$500K  and they only offer $140k loan, we were asking $240k. Meaning we need to put in another $100k.
My furloughed ended up being laid-off but I got paid for 60 days. As soon as I got my first paycheck, I re-applied again with me and my wife. In process right now. I don't see why they won't approve as my paychecks show $120k/yr. I still might get screwed if they asked for a current paycheck again when we close cause I won't have a paycheck by then. Fingers crossed.

Depending on what you signed, you may get screwed via a fraud offense for trying a fast one on them if they find out.   Some lenders are smart enough to have someone sign a document to the effect that the borrower will notify them of any current or expected changes in employment, income, etc.
In our experience, it's common to be asked for the most current pay stub just prior to closing. I suppose it wouldn't hurt to have some sort of excuse planned in case this happens.  Dunno, say you just got laid off again?? Good luck to you on squeaking by. I'm wishing you the best because I know you have the means to repay the note, job or no job.

The loan officer even told me expected closing will be 3 month out even in the event of approval.
Yup, if they asked me for a current paycheck I will let them know I got laid-off.
The re-finance is with the same lender and I'm going from 15 yr to 30 yr so my payments will actually be smaller.
Fingers cross that they won't be as thorough with me.

Aegishjalmur

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Re: Refinance mortgage while FIRE (no W2 income)
« Reply #14 on: December 28, 2020, 09:01:13 PM »

If the paycheck is still good(dated within 120 days of note date), they will likely not ask for a new one(Neither Fannie or Freddie require it, but some lenders have their own internal requirements). However, where you will run into issues is they are required, by both Fannie and Freddie, to pull a Verification of Employment within 10 days of the Note date. If that shows you are not currently employed, and you cannot qualify solely on your spouses income, the deal is dead. I've seen deals die the day before/morning of closing when we found the borrower wasn't employed any more.





Much Fishing to Do

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Re: Refinance mortgage while FIRE (no W2 income)
« Reply #15 on: December 29, 2020, 07:24:42 AM »
I've got to admit it has fascinated me how difficult it is to do something out of the box with a bank when you've actually got the cash you are allowing them to use to secure it with, I would think that would be a factor to trump all others. 

When I owned my business I had a line of credit that was secured by a personal taxable investment of mine that was required to be valued at twice the line of credit and was re-valuated every year to confirm that (I wasn't allowed to basically do anything with that account including even exchanging securities, and definitely not able to withdraw etc).   I thought this worked out perfectly for everyone because they had a lien on something worth twice as much that I had no intent on trading/using until FIRE and I had access to the funds I needed for large short term floats (couple weeks to couple months between paying contractors and getting paid for a project) without having to sell the securities or basically having to hang on to tons of cash at a time I wanted to be fully invested.

I was getting more and larger projects and wanted a higher line of credit and had plenty of taxable funds to add to that account to make sure the 2x ratio held.  I was never able to get that increase because their "analysis of my accounts" showed I "didn't need" a higher line of credit. I tried to explain that there was no way for me to show them I would borrow a lot more without having the higher credit line that would allow me to borrow a lot more.....to no avail....eh.


Jack0Life

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Re: Refinance mortgage while FIRE (no W2 income)
« Reply #16 on: December 29, 2020, 11:49:53 AM »

If the paycheck is still good(dated within 120 days of note date), they will likely not ask for a new one(Neither Fannie or Freddie require it, but some lenders have their own internal requirements). However, where you will run into issues is they are required, by both Fannie and Freddie, to pull a Verification of Employment within 10 days of the Note date. If that shows you are not currently employed, and you cannot qualify solely on your spouses income, the deal is dead. I've seen deals die the day before/morning of closing when we found the borrower wasn't employed any more.

Thanks. My current loan is also with this bank and when I closed the first time, they didn't ask me for current employment verification and current paycheck. Hopefully this will be the same this time around.
BTW, I got news that they approved my re-finance but he also informed me that closing won't be for a while.
EDIT: When I applied for re-finance, they didn't ask for employment verification nor any of my bank statements. Just current paychecks from the both of us.
« Last Edit: December 29, 2020, 11:53:42 AM by Jack0Life »

Aegishjalmur

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Re: Refinance mortgage while FIRE (no W2 income)
« Reply #17 on: December 29, 2020, 06:45:30 PM »

If the paycheck is still good(dated within 120 days of note date), they will likely not ask for a new one(Neither Fannie or Freddie require it, but some lenders have their own internal requirements). However, where you will run into issues is they are required, by both Fannie and Freddie, to pull a Verification of Employment within 10 days of the Note date. If that shows you are not currently employed, and you cannot qualify solely on your spouses income, the deal is dead. I've seen deals die the day before/morning of closing when we found the borrower wasn't employed any more.

Thanks. My current loan is also with this bank and when I closed the first time, they didn't ask me for current employment verification and current paycheck. Hopefully this will be the same this time around.
BTW, I got news that they approved my re-finance but he also informed me that closing won't be for a while.
EDIT: When I applied for re-finance, they didn't ask for employment verification nor any of my bank statements. Just current paychecks from the both of us.

With a refinance, that makes sense. 1). They don't need assets as you are not putting anything down and closing costs are absorbed into the loan as long as your Loan to Value (LTV) is sufficiently high to support it. 2). They wouldn't ask you for employment verification, that is something the Loan Processor/Underwriter will do internally.

2sk22

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Re: Refinance mortgage while FIRE (no W2 income)
« Reply #18 on: December 31, 2020, 03:21:13 AM »
I was getting more and larger projects and wanted a higher line of credit and had plenty of taxable funds to add to that account to make sure the 2x ratio held.  I was never able to get that increase because their "analysis of my accounts" showed I "didn't need" a higher line of credit. I tried to explain that there was no way for me to show them I would borrow a lot more without having the higher credit line that would allow me to borrow a lot more.....to no avail....eh.

This reminds me of the old joke that banks are only wiling to lend money to people who don't need the money :-)