Imagine a hypothetical person who is 60 years old with the following assets:
- 1 million dollars in growth stocks
- 4 million dollars in low yielding stocks
- 0.6 million in municipal bonds
About 1 million of the low yielding stocks are inside a Roth IRA.
He wants to buy a home for 1 million dollars. His plan is to sell the municipal bonds and borrow 500K from the bank. However, after he sells his bond off, his ordinary income will be about 40K a year and some of that is inside the Roth IRA.
He plans to collect social security at age 70.
I believe he can afford the home for the following reason. The total return ( dividends + capital gains ) on his portfolio should be about 400K per year assuming an 8% rate of return from the stock market.
Could this person get a mortgage for 500K? Can he afford this home?