{Case Study} How One Couple Downsized with the HECM for Purchase and Added $226,000 to Savings

Meet Bruce and Barbara

Married Couple (65/65) | Current Home Value $525,000 | Outstanding Mortgage Balance $100,000 ($1000/month)

IRA’s/Savings $405,000 | $24,000 Initial Withdrawal to Maintain Lifestyle

Retirement Concerns

Bruce and Barbara’s advisor discerned their primary concerns based on a strategic core framework I crafted–the 5 L’s.
Longevity (Lo) | Lifestyle (Lf) | Liquidity (Lq) | Legacy (Lg) | Long Term Care (Lt)

(These retirement concerns are simple to understand and extremely powerful when combined with laser-focused questions. Download you copy here.)

Barbara’s primary concern is running out of savings. She has done some online calculating and believes that they have not saved enough to sustain their $24,000/year draw and adjust each year for inflation. She believes $16,000 a year is more sustainable.

Bruce had planned for them to play more golf, maintain his club membership, and travel during the early years of retirement.

How Did Their Advisor Introduce Housing Wealth into the Conversation?

“If you could increase your cash flow, reduce your expenses, and add new money back into your retirement savings, but it involved moving to your next, last, and best home; would you want to know about it?”

“Yes,” they said as they began to consider what they just heard.

“More cash flow means more golf without worry,” thought Bruce.

“This means more money added to savings, so we can enjoy retirement and not worry about running out of savings,” thought Barbara.

“A newer house with less maintenance, lower taxes, and better amenities sounds great,” said both of them.

What Are Their Choices?

Bruce and Barbara sell their current home and pay off the existing mortgage ($100,000). They now have $400,000 in proceeds from the sale. They choose a $300,000 home in a nice retirement community. They have a few financing options:

  1. Pull from Savings to Pay Cash
    This option reduces their retirement assets by nearly 25% and locks the proceeds in the new property. What happens if another housing correction happens and the home loses value? What happens if they cannot get the money out of the property when they need it?
  2. Traditional Mortgage
    They can make a smaller downpayment in cash and finance the remaining balance by taking out a traditional loan. If they do this, they’ll be paying $700/month for 30 years–something they’d rather not do.
  3. Reverse Mortgage
    The HECM for Purchase program makes $126,000 available, so they must contribute a $174,000 down payment. They will have no mandatory mortgage payments and will be able to add $226,000 to savings.

Retirement Outcomes

Not only were Bruce and Barbara extremely happy to have a new home, they were relieved to improve their overall retirement savings and lifestyle, while reducing the drain on their portfolio by eliminating monthly mortgage payment requirements.

Learn more about the HECM for Purchase HERE and download the Buyers’ Guide HERE



Don Graves, RICP®, CLTC®, Certified Senior Advisor, CSA®
Don Graves, RICP® is a Retirement Income Certified Professional and one of the Nation’s Leading Educators on the Emerging Role of Reverse Mortgages in Retirement Income Planning. He is president and founder of the HECM Institute for Housing Wealth Studies and an adjunct professor of Retirement Income at The American College of Financial Services. He has helped tens of thousands of Advisors as well as more than 3,000 personal clients since the year 2000
Don Graves, RICP®, CLTC®, Certified Senior Advisor, CSA®
Don Graves, RICP®, CLTC®, Certified Senior Advisor, CSA®

Categories: Advisors, Financial, Real Estate

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