(5 min read)
Over the past decade, Baby Boomers (those born from 1944 to 1964) have been the generation to watch both as consumers and home buyers. Although a shift is taking place and many industries (including real estate) are beginning to focus on the Millennial generation – their housing needs, preferences and purchasing behavior — the Boomers still represent a significant portion of overall home sellers and buyers in 2019. Why? With their children out of the house, many Boomers are looking to downsize.
While they may be looking to transition into smaller homes, they still expect the same high-end amenities, finishes and offerings that come standard in a larger multifamily residence, and complements their modern, active lifestyle.
In this article, we’re sharing a couple of tips for those Baby Boomers looking to downsize, as well as mortgage options that complement their next forever home.
Reverse Mortgages hit the scene in 1961 and really gained popularity in 2018. It is a type of loan available to homeowners that are 62 years of age or older and have a high amount of equity built up in their current home. Borrowers are not required to make monthly principal and interest payments to their bank or lender, as they would be required to do with a traditional purchase or refinance mortgage. Instead, their bank or lender pays them in a lump sum(s) or via a line of credit based on their home’s equity.
Why is this a good option for the Modern Boomer? Picture a couple that would love to find a smaller home with less maintenance, etc. They no longer need to live in the best school district and want a lifestyle that allows them the freedom to travel and be more active. The amount of equity they have in their current home, although high, may not allow them to buy a small house or townhome outright because of their desired area’s higher home values. A reverse mortgage would allow them the opportunity to purchase the home they want, and still have money left over to travel because they are receiving their equity as additional income vs. rolling it into a traditional purchase.
Many of today’s higher-end condo communities offer a variety of upscale amenities to complement their convenient location and accessibility – making it a very desirable option for the modern Boomer. However, it has been difficult in the past to acquire a loan on a condo because of factors like community occupancy percentage (how many units are owner occupied versus investment properties) and HOA status – including financial reserves and arrearages. Good news, tools like Freddie Macs Condo Project Advisor now lets the buyer request unit-level exceptions for existing condominium projects early in the loan origination process so condo sales and financing are more streamlined.
There are many finance options available to homebuyers looking to downsize. If you have questions regarding any of the loan programs mentioned above, be sure to contact a Cardinal Financial expert today at 480-759-1500 and we’ll be happy to assist in finding your client a solution that works best for their lifestyle.