Reverse mortgages may be the retirement ticket

By Paula Burkes Erickson

Published: September 9, 2007

Their three grown children had long since moved out. But when Leaman and Judith Harris retired four years ago, they still were living in their home of 20 plus years — 3,700 square feet on a one-acre lot in north Edmond.

The couple downsized last summer to a 2,300-square-foot home in Touchmark at Coffee Creek, a resort-style retirement development in Edmond that offers independent, as well as assisted, living.

Leaman Harris, 69, was anxious to relinquish property maintenance. His wife, 65, looked forward to traveling more, without the worry of leaving an empty home. The final decision to move came after Leaman Harris had some heart problems that required stents.

"We realized it was time to slow down and do something different,” Harris said.

As millions of baby boomers follow the Harrises into retirement, "something different” could be the catch phrase for senior living. While some boomers are choosing retirement developments, others are downsizing to smaller custom-built homes, taking the equity from their family homes in reverse mortgages or buying recreational property that will become their primary residences in retirement.

Jamie Ham, executive director of Touchmark, said it's a misperception that seniors who choose retirement developments are giving up their independence.

"They're more independent because they're not cooking and cleaning every day, or driving everywhere,” Ham said.

Meals are available at the clubhouse, vans for transportation and rapid medical attention if needed.

Perhaps the most important aspect is sociability. Touchmark offers numerous activities, including health and wellness programming, bridge, bingo, pool-table tournaments and dog-walking clubs. Judith Leaman enjoys the Friday social hours, monthly wine tasting, dances and extensive on-site library.

"I've met really interesting people and enjoy being with them,” she said.

Touchmark homes average $250,000. Service fees for utilities, taxes and meals, average $2,000 a month; $275 a month for a second person.

On the flip side of retirement developments, reverse mortgages may be wise options for seniors 62 and older who are homeowners and haven't saved enough for retirement. The loans allow borrowers to convert 40 percent to 60 percent of the equity in their homes into tax-free income without giving up the title, said Dave France with Financial Freedom Senior Funding Corporation in Edmond. Instead of making monthly payments to a lender, borrowers can receive money in a single lump sum at closing, fixed monthly payments, a line of credit, or any combination.

"In general, you can get more money, the older you are,” France said.

One of France's clients took out a reverse mortgage to pay $60,000 in credit card debt. Another retired couple used the money from the mortgage to buy a travel trailer.

Area homebuilder Jeff Click sees a baby boomer trend toward "practical luxury. Empty-nesters may downsize and custom build a smaller home, with an adequate yard and no formal dining room, but not at the sacrifice of nicer living,” Click said. He recently had clients who were a couple that sold their home of 35 years in San Diego and built in Oklahoma City, near their children and grandchildren.

Seniors on fixed income also are concerned with energy efficiency, Click said.

"They don't want to waste any retirement dollars,” he said.

Meanwhile, there is a growing trend among Sooner boomers to obtain a second home, such as a lake property or ski condo, for future retirement property.

About 5 percent of production in the residential mortgage industry falls within that category, said David Feisal, senior vice president of Spirit Bank and immediate past president of the Oklahoma Mortgage Bankers Association.

"They're buying while they still have income streams and, in many instances, still growing equity in their first homes,” Feisal said.

The second homes often are smaller and carry lower real estate taxes, he said. Such boomers may or may not keep their first home after retirement.

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