Financial considerations when purchasing your new home in an Active Adult Community.
May 1, 2020
As in all home purchases as a buyer you are concerned with both the initial cost of the home and the monthly expenses of owning the home. Let’s first discuss the monthly obligations. In this age demographic most people are retired on a fixed income, so it is important to calculate the cost of the mortgage payments (if any), taxes, insurance and HOA dues to know the total due each month.
Insurance can vary greatly from one area of the country to another. Homeowners insurance in Florida is about 6 times higher than in interior North Carolina due to the prevalence of hurricanes. In addition most of Florida is in a designated Flood Zone by FEMA, a division of the Federal Government. If you have a mortgage on your home in Florida you will in all likelihood have to carry both homeowners and flood insurance. Note that Flood Insurance may also be required in other state if you live near water.
PROPERTY TAX EXPENSES
Property Taxes also vary greatly from state to state. Folks in Northeastern states pay taxes 4 or 5 times higher than southern states. You will need to check the rate for the area you wish to purchase your home in. You will also want to compare income tax rules which vary state to state
HOME OWNERS ASSOCIATION DUES
HOA, that is Home Owners Association, dues most likely are higher in an active adult community as they usually include lawn maintenance as well as maintenance of the community amenities, which as we discussed vary greatly in size and number.
The second consideration is the cost of the home. We have previously discussed. location as well as number, quality and size of amenities in a community will all affect a homes value and thus price.
A significant percentage of buyers in Active Adult Communities purchase cash while the rest obtain financing to purchase. One little known mortgage product, specifically for persons 62 and older is a HECM, Home Equity Conversion Mortgage loan. In a HECM loan the buyer pays approximately ½ of the price of the home in cash and NEVER makes a mortgage payment. You will need to seek the advice of a HECM loan specialist for details but this type loan often boosts the buying power of buyers to achieve more of what they want in their new home.
WANTS VS. NEEDS
You may need to re-prioritize your wants and needs for your new home to align with your initial price and your monthly budget. If you know your budget, you will know the questions to ask when researching your new home. This will also help your Real Estate professional to guide you to the communities that will work best for you. One final note. Your RE professional can help you negotiate the cost of not only resales but also new construction purchases. The commission is always paid by the seller/builder.
Our next blog in this series will be; What are, and a comparison of, the Three most popular areas for 55+/ Active Adult Communities?
What is the average age in a 55+ Active Adult Community?
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