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Post Info TOPIC: Financing Full Time Rig - Before or After Closing of Home?


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Financing Full Time Rig - Before or After Closing of Home?


We are in crunch time right now going from being a home owner to a full time rv'er. Our home just unexpectedly sold before we planned (we signed purchase agreement yesterday with a planned May 1st closing). So, now we have to get our MS 39DBRS3 ordered this week in order to get it in time.

Question is on financing. Any folks recently financed as full timers, and did you close on the new RV before or after the home closing.? We can stay with relatives if we get the RV after the home closing. My concern is if we will have financing problems because of not being homeowners if we buy later? We will be talking to the 3 dealers we are negotiating with, but want to know what your experiences have been?



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My experience is that it is much easier to finance while you still own your home and have a static address.  The other big thing is whether or not you are still working and have the ability to show repayment capacity.  In today's  world your credit score is also very important.



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Yes, I am still employed, retiring at the end of this year and we do have a good credit score. The main thing is if the actual purchase of the RV has to be done before the home closing, or just be approved for RV financing before home closing?



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Not saying it's a bad thing, but you should ask yourself whether you want to carry debt into retirement or not. Your financial situation may be such that the question is a non-starter.  Just saying, that anytime you say "Oh, we can afford that..." a warning bell should go off in your head before you leap. First question would be what happens if somehow we suffer income loss or we get hit with a major unplanned expense.  Owning a roof over your head free and clear, be it a S&B or on wheels, makes such situations less stressful.

FWIW, Brian



-- Edited by biggaRView on Sunday 1st of February 2015 12:32:35 PM

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We have definitely factored debt into our retirement expenses. The current home is not paid off, and the RV will be paid off sooner, at a lower cost then the house. In addition, we have all our income & expenses with our Financial Advisor. Thanks for the tip, it is important.



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We have a similar question, tktoth. We have a home that we rent out, and we are currently renting in another location. When we apply for financing, I'm wondering the same thing, as we are contemplating selling the home we own. We are not sure if it matters to lenders or not. I guess we'll have to see when the time comes.

Roy

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tktoth wrote:

Yes, I am still employed, retiring at the end of this year and we do have a good credit score. The main thing is if the actual purchase of the RV has to be done before the home closing, or just be approved for RV financing before home closing?


 Tom and Karen,

When we ordered our 2010 Mobile Suites 38TKSB3, we got a pre-approval prior to ordering.  However, in our case the pre-approval was only valid for something like 90 days, and it took DRV Suites 12 weeks from the order date to our pick-up date.  When our Mobile Suites came in, the bank would no longer honor the pre-approval.  Fortunately, we were still living in our home at the time, and we secured financing for the RV through USAA.

So, if you do get a pre-approval, be sure and ask for how long of time that approval will provide.

Terry



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You need to have sufficient income in order to finance.

Rv's are a luxury item.. not a home.

No income.. no financing.

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Absolutely right, Steve.
I was told I did not have enough "disposable income" to finance the RV. They "wanted me to be able to enjoy using the RV". Got creative and used a home equity loan which my home bank was very happy to do (and at a much lower interest rate). When the house sells, the loans will be paid off with money left over.

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Junkman Op never said they had no income. Many people retired make more money than I. Alliant CU is very rv friendly, Essesx is also. We use Alliant and Houston Federal CU which we have been with over 20 years.

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We got a home equity loan to pay for the rig and truck, had no home mortgage and the HE got paid off at closing. Hit the road with no debt. 



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We purchased our new trailer last year, while we were already fulltimers. We were able to get financed with no problem, even without having a "static" address. We purchased our first rig while we still had a rental home, but we traded that rig off and bought this new one after living on the road fulltime for 2yrs. I think it all depends on the lending institution. Some of them will actually google the address and they want to require you to have a static address, and others really don't care. I do know that we were told NOT to mention the fulltiming thing to the banks though when trying to get financed. Loans on RV's are definitely harder to get, but I think lending institutions are becoming a bit more lenient with their terms these days. I like Terry's idea of the pre-approval if you are worried about it. A little peace of mind as long as it doesn't expire before you get the unit. Most preapprovals have an expiration date.
Good luck!!! Hope you get the rig of your dreams and the process goes as smoothly as possible for you!

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I had no problem financing our Rv through the C/U which we had dealt with for the past 20+ years. I got a loan based on the value of the Rv without any problem. Our house hadn't sold but I could not get a home equity loan because the house was list for sale.


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You folks that financed w/o income...Did you tell them you where full timing?

I think that is where the issue lies.. if you don't tell them.. and something happens, you might have issues?

As the lien holder .. they will also see your insurance.. And I must have fulltimers insurance.. because I want it.. to protect myself.



-- Edited by The Junkman on Monday 2nd of February 2015 04:43:55 PM

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I did talk to Essex Credit today, and they do both full timer and non loans. I filled out an application to make sure I am qualified so I know before ordering. They said applying now shows worst case debt/ income ratio because of being a current home owner with a mortgage. If we happen to sell before the trailer arrives (a likely scenario) then ratio will be better but I will pay a higher full time rate (0.16 higher as of today). Just so the "Junkman" knows, I have an income now and am lucky enough to have a good retirement income (and will likely work at some level). Thanks for all the input.

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I have to ask, "Why would you want to finance, unless you absolutely have to."

Unless you have some magical investment stream, the interest on the RV will cost you more than the return on your investments.

Assuming you file jointly with your wife/partner, your interest & other deductions are unlikely to exceed your standard deduction of around $12,000. If they don't exceed the standard deduction, every dime of the interest will come directly out of your pocket. Also, only the part of your spending over the standard deduction benefits you. Every dime you spend before reaching the standard deduction comes right out of your pocket.

Of course there could be extenuating circumstances, like retiring under 59 1/2 and unable to access your IRA/401K w/o penalties, or you don't have investments/savings to pay for the RV. I'm sure there are other circumstances as well.

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In response to a few of these later post, I must add that my husband and I are not retired, nor very close to it (I am 34 and he is 43). We chose this lifestyle due to husbands job. We could have rented a home everywhere we go (usually stay put for a 1 1/2yrs or more at a time) but I didn't want to have the task of moving all of that stuff all the time. This is a much easier lifestyle for us. Also, with that being said, we financed because we can. We have the steady income to do so. I wouldn't do it without knowing that I had the proper income to sustain such a debt. Also, I know what disposable money I have in the bank, therefore, I am not worried. I believe that those financial situations and decisions are solely for those involved, to be involved in.

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I just checked with our preacher. It isn't a sin to finance. Some don't have a wad to use to pay cash. Some want a little more RV than they can pay cash for. Some have a pretty healthy retirement income and aren't concerned with a house payment. All are represented on this forum from those that eat cat food to those that eat only prime steak. Those that have money flying out of your butt might try to be a little more inclusive of those that do not.

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We bought before the home closed and since we got a new truck and a new fifth wheel I made sure we closed on the truck prior to closing on the fifth wheel just in case there were any issue...there weren't but a fifth wheel without a rig might have been worthless.

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We have the "monies" to pay cash but do finance. Our "monies" dividends are more than interest rates. And we get to write off the interest on taxes. If I'm doing wrong please explain how.

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I don't know that financing your RV is "wrong". We all have to make choices that suits our situation best.

What I do know is that the current (2014) standard deduction for our income taxes for a couple filing jointly is $12,400. So assuming your are married or have a partner and file a joint tax return, the ONLY way you can "write off" the interest on an RV is if you are spending a total of $12,400 out of your own pocket on deductible things like interest and taxes on a sticks & bricks, interest on a second home loan (I believe an RV qualifies as such), charitable contributions, medical expenses over (I think) 10% of your income. There are many more deductible things, but the above are the most common.

A single person has much lower $6200 standard deduction, but even that is hard to reach if your main deduction is the interest on an RV, unless it is fairly expensive.

So if you have spent the $12,400 on the deductible items, you can now realize some savings on the amount over the $12,400. So if you have deductible items totaling $15,400 you can subtract $3000 from your total income. (I don't remember if that is gross income or taxable income). So if you are in the 15% tax bracket you get to save a whopping $450 after spending over $15,000 of your hard earned money.

If you have no deductible items at all, you get to keep all $12,400 in your pocket. It seems to me to be a no brainier to keep the $12,400 in your pocket if you can.

Now there are reasons why you would want to itemize your deductions.
-- very large out of your pocket medical expenses.
-- owning a $250K or much more expensive home with a large interest payment
-- owning a really nice motorhome or 5'er/tow vehicle combination with loans in the $300 to half million range. Better if it is a second home.
-- large charitable contributions.

Now, I do realize that there are RV'ers on this forum who don't have the money or investments they can access to pay cash for an RV and have to finance. They have to pay for their RV with their current income. They don't have a choice. They are highly unlikely to be able itemize their deductions either.

Except for those who have had the misfortune to have medical expenses so they do exceed the standard deduction, I salute those who have have all the financial assets, loans, real estate taxes, charitable contributions to be able to itemize your deductions. YOU truly have a lot more money than I have.



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A-S Travelers wrote:

I don't know that financing your RV is "wrong". We all have to make choices that suits our situation best.

What I do know is that the current (2014) standard deduction for our income taxes for a couple filing jointly is $12,400. So assuming your are married or have a partner and file a joint tax return, the ONLY way you can "write off" the interest on an RV is if you are spending a total of $12,400 out of your own pocket on deductible things like interest and taxes on a sticks & bricks, interest on a second home loan (I believe an RV qualifies as such), charitable contributions, medical expenses over (I think) 10% of your income. There are many more deductible things, but the above are the most common.

A single person has much lower $6200 standard deduction, but even that is hard to reach if your main deduction is the interest on an RV, unless it is fairly expensive.

So if you have spent the $12,400 on the deductible items, you can now realize some savings on the amount over the $12,400. So if you have deductible items totaling $15,400 you can subtract $3000 from your total income. (I don't remember if that is gross income or taxable income). So if you are in the 15% tax bracket you get to save a whopping $450 after spending over $15,000 of your hard earned money.

If you have no deductible items at all, you get to keep all $12,400 in your pocket. It seems to me to be a no brainier to keep the $12,400 in your pocket if you can.

Now there are reasons why you would want to itemize your deductions.
-- very large out of your pocket medical expenses.
-- owning a $250K or much more expensive home with a large interest payment
-- owning a really nice motorhome or 5'er/tow vehicle combination with loans in the $300 to half million range. Better if it is a second home.
-- large charitable contributions.

Now, I do realize that there are RV'ers on this forum who don't have the money or investments they can access to pay cash for an RV and have to finance. They have to pay for their RV with their current income. They don't have a choice. They are highly unlikely to be able itemize their deductions either.

Except for those who have had the misfortune to have medical expenses so they do exceed the standard deduction, I salute those who have have all the financial assets, loans, real estate taxes, charitable contributions to be able to itemize your deductions. YOU truly have a lot more money than I have.


 How does that work if you are running a business out of your RV?



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A-S Travelers wrote:

....So if you have spent the $12,400 on the deductible items, you can now realize some savings on the amount over the $12,400. So if you have deductible items totaling $15,400 you can subtract $3000 from your total income. (I don't remember if that is gross income or taxable income). So if you are in the 15% tax bracket you get to save a whopping $450 after spending over $15,000 of your hard earned money.

If you have no deductible items at all, you get to keep all $12,400 in your pocket. It seems to me to be a no brainier to keep the $12,400 in your pocket if you can.....


 That is not quite correct. 12400(couple or 6200 single) is a deduction from reported income. Only if your income was that low (excluding your personal exemption), would you not pay any tax (not keep the 12400). I'm fairly certain that most people will have spent a good portion of 12400 worth of their income on various things for which the standard deduction is designed to shelter. It is true that for most people, taking the standard deduction and allowed exemptions is the simplest and preferred path.  Those with much more income or have more complicated tax situations (like running a business from an RV like in Junkman's follow-up question) will need, and have available, other methods of reducing their tax owed. Those people should probably seek professional guidance as to the best strategies.

Sorry Terry if this is getting away from the OP's original thought processs.

Brian



-- Edited by biggaRView on Friday 6th of February 2015 06:07:13 AM

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"How does that work if you are running a business out of your RV?"

Interesting question.  I don't know. 

This topic was started by Tktoth who is going to sell a home, will be retiring down the road and is going to finance his RV.  I was attempting to point out that the money spent on financing is seldom off set by investment income you would have from that money.  IMO you are much better off, at any point in your life, if you can be free if debt. 

If I was running a business, I would buy a copy of Turbo Tax that includes business taxes and start entering what I thought my business income and expenses will be.  That way I would start to learn the in's and out's of business taxes.  Even with using Turbo Tax, I would probably opt to have my taxes done by a professional.  At least until I was confident I understood how the tax law related to my business. 

 



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biggaRView wrote:


 That is not quite correct. 12400(couple or 6200 single) is a deduction from reported income. Only if your income was that low (excluding your personal exemption), would you not pay any tax (not keep the 12400). I'm fairly certain that most people will have spent a good portion of 12400 worth of their income on various things for which the standard deduction is designed to shelter. It is true that for most people, taking the standard deduction and allowed exemptions is the simplest and preferred path.  Those with much more income or have more complicated tax situations (like running a business from an RV like in Junkman's follow-up question) will need, and have available, other methods of reducing their tax owed. Those people should probably seek professional guidance as to the best strategies.

Sorry Terry if this is getting away from the OP's original thought processs.

Brian



-- Edited by biggaRView on Friday 6th of February 2015 06:07:13 AM


In the case of the OP for this topic, I am hard pressed to find voluntary expenses, which would exceed the standard deduction and would be deductible for a retired RV'er w/o a home.   Certainly interest expense on your RV would be deductible, but you still have to take the first $12,400 out of your pocket before you see any tax benefit.  I view not spending that $12,400 as money staying in my pocket.  Certainly you still have to pay taxes, but in addition to paying the taxes, you are spending $12,400 of your income on top of paying the taxes.  Or in the example I gave earlier, spending $15,400 to save $450. 

To make things even more interesting, if both people filing the taxes are over 65, the standard deduction is $14,800.  That is a huge amount of money to spend before you ever see a reduction in your taxes.

Owning a business becomes much more complicated.  However intentionally spending money to reduce taxes, still comes out of your profit.  Even if your business income is taxed at 50%, intentionally spending $10K only saves you $5K.  Don't spend the $10K and you keep the entire $10K, therefore earning you $5K.  Yes this is an over simplification. 

Sometimes we spend so much time reducing our taxes, we loose sight of the fact we are spending more money to save a few dollars in taxes. 

 



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We are getting way off track here in more than one way. One of the rules here is to be nice and respectful.

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Al, I think we are saying the same thing only differently. sent you a PM.



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We met with bank the week we had planned closing, they knew the house was going to be done with in 4 days. No issue with financing part of the MH but I am still employed and DH is retired. We did change our address to our camper lot and are able to receive mail there so that is now our "permanent address." Maybe that made a difference but we financed with our local CU and they know us there and we had excellent credit. It went without a hitch, closed on house and 24 hrs later had check for MH in hand. Good luck, I think it all depends on banks and your situation.

We head south end of Oct. our first trip and start of a new adventure.



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Appreciate the input, but you are 2 1/2 years too late. The post was from 2015. We are in our 3rd year of FT living and loving it!

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Appreciate the input, but you are 2 1/2 years too late. The post was from 2015. We are in our 3rd year of FT living and loving it!

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When we hit the road our coach was paid in full but after 1 1/2 years we decided to buy a new one. Lucky for us we were in a situation that we were going to pay cash for the new RV however when a 1.5% interest rate was offered we decided making payments with that low of a interest rate was not a bad thing. Now this is where this is more pertinent to your question.
When we started doing paperwork they asked our address and we gave our mail forwarding PO Box and stated that we fulltime. At that point they said, OK I didn't hear that do you have any physical address we can use. We said yes and used an address our mail forwarding company supplies and all was good.
The person doing the paperwork said it would never fly without the physical address but this was just in OUR situation, others could be different.

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