April 4, 2012

Seniors can live in their “dream home” without expensive monthly fees…a moderate one-time down payment does it

danBy Dan Dolan
Dan Dolan Homes

The need for more senior housing in the Quad-Cities and across the nation continues unabated. Nationally, some 10,000 seniors join the retirement pool daily, and for many that means a beginning or ongoing search for a change in housing that meets their new lifestyle preferences. For some, that means downsizing from the home that has served their family for years. For others, it means a relocation to be closer to their families. For others, it means a move to warmer climes. But for most, it means a move to a more comfortable ambience in an area close to where they live already–close to family, friends and the people and institutions important to them, including church, doctors, shopping, etc.

But how best to fulfill that housing need becomes an important issue to resolve. Statistically, a single family ranch-style home that allows for seniors to age in place in a home with everything on one floor is still the preferred choice for most retired households. “There’s no place like home” remains the prevailing theme. And, while independent living or assisted living facilities do hold appeal for some, the ongoing monthly fees that continue to rise year after year make it difficult for most to budget and forecast how long their funds will last. Currently, these facilities are largely in the range of $3,000 to $6,000 (or more) per month or $36,000 to $72,000 a year. For many, their available funds will only carry them in that type of facility for a year or two.

In my view, the program with the greatest opportunity for seniors, and still largely misunderstood by many, is the Reverse Mortgage for Purchase program approved by Congress in early 2009. And here, I’m sorry to say that some of the financial institutions involved in making the loans have done very little to help promote this program– and to differentiate the “for purchase” mortgage program from the long-standing traditional reverse mortgages for existing homes of which many seniors seem to be fearful.

In essence, the new Reverse Mortgage for Purchase program allows a buyer 62 years of age or older, to buy their new home with a single “moderate” down payment, usually derived from the sale of their existing home. And with a reverse mortgage for purchase, they can live in their new home “forever” without making any further mortgage payments. They simply pay their taxes, homeowners insurance and any monthly fee for lawn mowing and snow removal—and that’s it. They own the home. Upon their passing or departure, the home is sold by them or their estate, the reverse mortgage is paid off with the home sale proceeds, and they or their estate retain any residual funds. Their debt never exceeds the sale proceeds, so neither they nor their estate incurs any residual or “leftover” debt.

Typically, a 76-year-old buyer will make an estimated $75,000 one time down payment on a $200,000 home. That amount varies by age of the buyer, prevailing fixed mortgage rates at time of closing and the related closing costs. In my opinion, a reverse mortgage for purchase can be a very important tool for asset preservation and estate planning.

This mortgage also helps seniors budget their monthly operating costs, because essentially their very manageable out-of-pocket housing costs after the down payment are estimated at around $700 or so per month. That includes real-estate taxes, homeowners insurance and association fees for lawn maintenance and snow removal. Moreover, Dan Dolan homes are very energy efficient so heating and cooling costs tend to average $90 to about $100 a month.

Forecasting these modest monthly costs provides a peace of mind for the seniors and their families, and it limits the likelihood that they will ever run out of money for living expenses.

Moreover, seniors looking to buy a new home that better meets their lifestyle requirements should make every effort to consider the current “free money” offered by the Davenport Now tax rebate program. We at Dan Dolan Homes are very pleased to help seniors better understand the available programs and to take advantage of them.

Look for the new Dan Dolan Town Homes in Bettendorf

If you visited the Dan Dolan homes at Stone Gate East in East Davenport recently, you likely noticed our announcement of our very
latest development in Bettendorf. Three units have been sold there and are under construction; several more lots have been reserved with construction begun, and you can actually visit our new furnished model home there each Sunday from 1 to 4 p.m. Take a drive out 53rd Avenue in Bettendorf to Devils Glen Rd. and proceed north to the signs on the right. Occupancy will begin late spring.

I would invite seniors to drop by any of our weekend open houses and visit with me or one of the Realtor hosts at the open. If you would like to make an appointment for a private showing, I can be reached at (563) 570-1460, and I can be found weekends at Dan Dolan Homes opens in Blue Grass and Muscatine. Don Gibeault hosts our open houses at Stone Gate East in Davenport, Saturdays and Sundays from 1 to 4 p.m. He can be reached at (563) 650-8007. In Bettendorf, Rick Weipert (563) 320-2626 and Jane Bauman (563)249-4491 share the host duties. Come out and visit with us at the site of your choice any weekend soon.