50+ Lifestyles

What a home buyer taught me about a Reverse Mortgage for Purchase and saving over $50,000 a year in independent living costs.

By Dan Dolan
Dan Dolan Homes

Once again, I learned a lot from a home buyer. Those of you who read my column in this publication may recall that my weekend “Meet the Builder” open houses are a constant source of information for me. It’s my best source of consumer research and has led to some wonderful ideas including a recently completed home at Stone Gate East. With so many seniors now wanting an office on the main floor, I was urged to transform our traditional 3-season room to a 4-season room that could be used as an office, but also as a guest room, den, TV room or any combination thereof. So far, we have sold over a dozen homes with that feature. It’s a great idea!

Along the same lines, many of you know we have supported the mortgage program approved by Congress a couple years ago whereby seniors age 62 and over could purchase a 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. While reverse mortgages have been around for a long time, the Reverse Mortgage for Purchase is relatively new and specifically designed to facilitate purchase of a home by seniors. 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 have largely promoted the RM as a tool for allowing seniors to “preserve their capital.” And we think that it does that. More specifically, by taking some 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 released from their existing home. For one buyer we know, that is 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 payments. Again, that’s a preservation of capital. And we see all of that as very desirable.

But here’s what’s “new.” One buyer told me that unless she moved to a home with all-on-one-floor living, she would soon need to move into an independent living facility at a cost of some $50,000 a year for her and her husband. Her current home is a split-level with the laundry in the basement. And she must climb 8 stairs to the kitchen whenever she parks her car in her garage. Climbing stairs has become difficult and she sees that becoming impossible soon. Her current home should sell for about $145,000 and the couple has paid off the mortgage.

As she described it to me, by selling her current home and buying a $270,000 Dan Dolan Homes town home at Stone Gate East, she will have enough funds for the RMFP down payment, she will have no monthly mortgage payment, she will do away with all those stairs, she will now live in a new, low-maintenance, energy efficient home with no lawn to mow or snow to shovel, and she will be living in a highly desirable part of town that’s close to everything. Or as she asked her husband, “what’s not to like”?

For this couple with modest resources, a possible $50,000 annual outlay for an independent living facility would have depleted their resources in about three years. Instead, by using a Reverse Mortgage for Purchase, the couple can live in their new home—an improved new “own home”—and they can hold on to their resources without a need to make major monthly payments. As I pointed out to the couple, this is also a form of preservation of capital, but from their perspective, it insured a higher quality of life with greater comfort than they could ever achieve in their current home. Plus,  there would be no need for an ongoing $4,000-plus monthly fee for an independent living facility. Once again, what’s not to like?

For a full explanation of how a Reverse Mortgage for Purchase might be of help to you in buying a new Dan Dolan home, visit one of our home sites any weekend in Clinton, Bettendorf, Pleasant Valley, Blue Grass, Muscatine or Davenport. Besides being open weekends, many of our model homes are open around lunch time during the week. Call our office at (563) 381-4088 for the open house schedule at your preferred location.

We generally have homes ready for move-in within 30 days or so. But if you would like us to build a home for you from our drawing board, our building schedule is currently on a 5-month to 6-month schedule. We would encourage you to start the planning process as soon as possible to help insure your preferred move-date. We hope to meet with you soon.