January 28, 2013

How a one-time down payment lets you live “payment free” for as long as you remain in your home. What’s not to like?

danBy Dan Dolan
Dan Dolan Homes

Many of you who read my commentaries in this publication know we have supported the mortgage program approved by Congress a couple years ago. The Reverse Mortgage for Purchase lets seniors age 62 and over purchase a new Dan Dolan home with a moderate one-time down payment. With no further mortgage payments ever, for as long as the buyers remain in the home. And though reverse mortgages have been around for a long time, the Reverse Mortgage for Purchase RMFP) is relatively new and specifically designed to facilitate purchase of a home by seniors. To date, many of our buyers have used the RMFP, and we think it’s a good idea. But, that’s a determination individual buyers must make for themselves.

We see the RMFP as a tool for allowing seniors to “preserve their capital.” More specifically, by taking a portion of the proceeds from the sale of the existing home, using it for the minimum down payment on the new home—and investing any excess proceeds—the home buyers are getting a return on the surplus funds. For one buyer we know, that’s several hundred dollars a month. Additionally, by not having to make a monthly mortgage payment, the buyer preserves cash flow, and that often precludes the need to dip into the 401K to make those monthly mortgage payments.

One buyer I spoke with, told me that unless she moved to a new home with everything on one floor, she would soon need to relocate to an independent living facility at a cost of about $70,000 annually for her and her husband. Currently, the couple lives in a split-level with the laundry in the basement. And she must climb several stairs to the kitchen whenever she comes home and drives into the garage. Climbing stairs has become difficult, and she sees that becoming impossible soon.

As she described it to me, her current home should sell for about $125,000 and the couple have paid off the mortgage. By selling the present home and buying a $250,000 Dan Dolan Homes town home, the couple will have enough funds available for the RMFP down payment which, in their case, will be around $85,000. That means that they will have no monthly mortgage payment; they will do away with all those stairs; they will now live in a new, low-maintenance, energy efficient home with no lawn to mow or snow to shovel, and they will add about $40,000 to their bank account—the money left over from the sale of their present home. As she asked her husband, “What’s not to like?”

For this couple with modest resources, a possible $70,000 annual expense for an independent living facility would have depleted their resources in about two years. From their perspective, living in a new home with everything on one floor, also means a higher quality of life with greater comfort than they could ever achieve in their present home or living in a retirement “high rise hotel.” Again, what’s not to like?

If you are age 62 or over, visit with us soon at Dan Dolan Homes for a full explanation of how a Reverse Mortgage for Purchase might preserve your own capital and make it possible for you to live in a brand new energy efficient Dan Dolan home with everything on one floor. In the Quad-Cities, one of our Realtor hosts at Glengevlin in Bettendorf or at Stone Gate East in Davenport will be happy to show you through our
several model homes and explain how a Reverse Mortgage for Purchase might be ideal for you. We’re open weekends and by reservation anytime at your convenience. Depending on the site and model you select, making your choice now could let you move in as soon as May or June—sooner if you select one of our existing models. Visit with us this weekend and see if a Reverse Mortgage for Purchase makes sense for you.