Author Topic: The Motivation Letter  (Read 5688 times)

HAL9000

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The Motivation Letter
« on: March 17, 2015, 12:45:29 PM »
We are downsizing our current home. We are moving from a 4br 3000+ sqft 1 acre property with a 600sqft guest house to a 1200sqft 2br Condo. The mortgage lender asked for a motivation letter to justify the downsizing. Here is what I wrote:



This is a motivation letter stating the reason we are selling my current home located at <removed> and purchasing a new home. We are significantly downsizing our residence to accelerate our ability to achieve early retirement. We have built a financial plan that incorporates significantly reducing our expenses (typical largest expense is housing) and maintaining our income will allow us to use the increased delta between expenses and income to achieve early retirement within 5-7 years.  My personal goal is to have the option of retiring at 50. Investing the income/expense delta by eliminating debt, including mortgage, then investing the rest is a simple explanation of the strategy.

Owning a large home has its benefits, but also its downsides. Big is not always better. Cleaning, utilities, yard maintenance, general maintenance, higher taxes, etc… all decrease our available time and funds. We view the condo as liberating from a time and expense perspective, yes we are moving into a smaller home, but we will have more time and funds (spending within budget) to spend with family, experiencing life. We are trying to shift from buying things to buying experiences.

The issue of moving into a smaller place is not a concern for our family. We do not plan on spending all of our time in the home. We have family close by and have a good friend who lives in the division we are purchasing in. One of our children lives with us part time. The layout and space of the home is not a problem for us.

J.C.



I almost put a paragraph is about MMM and the philosophy, but thought it would be too much.

MLKnits

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Re: The Motivation Letter
« Reply #1 on: March 17, 2015, 01:00:09 PM »
I'd love to know whether these kinds of letters get passed around when they're received at the bank, and if so, with what kind of coworker-to-coworker commentary. Too bad I can't be a fly on that wall!

Gone Fishing

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Re: The Motivation Letter
« Reply #2 on: March 17, 2015, 01:09:24 PM »
I think that will get your point across!

I would have said "I am buying a smaller house to reduce my mortgage payment."

arebelspy

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Re: The Motivation Letter
« Reply #3 on: March 17, 2015, 03:20:41 PM »
(slow clap)
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

HAL9000

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Re: The Motivation Letter
« Reply #4 on: March 17, 2015, 03:29:18 PM »
I think that will get your point across!

I would have said "I am buying a smaller house to reduce my mortgage payment."

That's what I said when I submitted it the first time and it wasn't sufficient. They asked me to re-write it because people do not typically downsize. It's unamerican.

MsSindy

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Re: The Motivation Letter
« Reply #5 on: March 17, 2015, 05:45:22 PM »
Wait, I'm confused.  Your lender for your new house wants you to justify why you want a smaller house before they will lend you money?  I have absolutely never heard of that.  They typically look at the value of the house vs loan, your credit, job stability...things like that.  I'm flumoxed!

BTW, though, totally kick-ass letter!

CowboyAndIndian

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Re: The Motivation Letter
« Reply #6 on: March 17, 2015, 06:10:40 PM »
Wait, I'm confused.  Your lender for your new house wants you to justify why you want a smaller house before they will lend you money?  I have absolutely never heard of that.  They typically look at the value of the house vs loan, your credit, job stability...things like that.  I'm flumoxed!

+1

I would have told them to take a hike and gone to another lender. It is none of their business.

Could you post the name of the lender?

MikeBear

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Re: The Motivation Letter
« Reply #7 on: March 17, 2015, 06:26:31 PM »
The reason they do that, is they REALLY believe you are just trying to scam them by buying a rental property, YET claim it's going to be "owner occupied", thus you'd get a lower interest rate, and don't have to pay as much down. If that's really what you are doing, they have far more risk than if you are going to live in it.

They hardy ever understand somebody moving to a much smaller dwelling than they are used to living in... So, the automatic belief it's going to be a rental...

ShortInSeattle

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Re: The Motivation Letter
« Reply #8 on: March 17, 2015, 06:35:41 PM »
Congrats on your pending downsize. We got tons of weird looks from people when we downsized. We ended up buying our small condo with cash so we didn't have to deal with lender craziness.

We did have a few people respond with:

1. Blank look.
2. Confused expression.
3. "Nobody does that!"
4. (shrug) "Good for you."

Great letter. :)

HAL9000

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Re: The Motivation Letter
« Reply #9 on: March 17, 2015, 06:41:41 PM »
The reason they do that, is they REALLY believe you are just trying to scam them by buying a rental property, YET claim it's going to be "owner occupied", thus you'd get a lower interest rate, and don't have to pay as much down. If that's really what you are doing, they have far more risk than if you are going to live in it.

They hardy ever understand somebody moving to a much smaller dwelling than they are used to living in... So, the automatic belief it's going to be a rental...

Bingo. It's apparently the largest mortgage fraud type. We had to prove we had our existing home on the market plus give them the motivation letter. If I didn't pass that test, I would have had to buy it as a rental property with minimum 20% down and higher rate. We really are planning on moving into it as soon as it closes.