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lindsay · · 2 replies

How do asset-backed mortgages (/other lending) work? This seems like it might be a big deal for people who are some flavor of FI, but I don't remember having heard anybody talk about it. Like, I consider myself "BarristaFI," so I'm still making some money, but nobody would approve me for a new car loan from it, never mind a mortgage.

I'd hate to cash my investments out to buy a house in cash, because I wouldn't want that large a percentage of my net worth to be in my primary residence when I don't necessarily know how long I want to live where I am, or whether my family situation might change over the coming years. But my mom's health is getting kind of rocky and the mobile home across the street from hers is for sale and I could easily afford the payments on it (it's less than my current rent). I just don't know what the process looks like to convince a lender of this if it ended up being something I wanted to do (for life reasons much more than for investment reasons).

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DanPfromSC

DanPfromSC

6 months ago

If you have sufficient assets to pay cash for a property, most banks should grant the loan. Keep in mind that mobile homes are financed differently and seen as depreciating assets. If possible I would encourage you to try to find a single family home where you might be able to rent out part of it to help subsidize the payments while you continue your FI journey. Real property is fairly stable (with the exception of 2008) and can act like “bonds” in your holdings. There are other tax benefits to holding real estate depending on how it’s structured. If you do end up relocating for any reason, be sure that the home you buy can be easily rented so that your relocation isn’t dependent on selling your property.

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