Mortgage tips for retirees

The last time many people now nearing retirement were in the home-buying market, the popular mortgage had a fixed term (up to 30 years) as well as a fixed rate (perhaps 5 or 6 percent).

Consumer interest rates were low as well. But all that has changed.

Home mortgages now come in a wide variety of sizes and shapes, and interest rates run around 12 to 13 percent.

Fortunately for those who want them, the basic fixed-term, fixed-rate option is still available. Most experts recommend that people who need to finance a retirement home try to find such a mortgage.

On the other hand, many retirees don't need or want a mortgage, because they can pay for their home with cash. However, buyers should keep in mind that deductible interest payments on the mortgage can serve as a tax shelter against the homeowner's retirement income.

For those planning to retire in 10 or 15 years, an increasingly popular vehicle is the growing-equity mortgage (GEM). In this case, the buyer makes a large down payment.

Initial monthly payments are comparable to a fixed-rate, 30-year schedule. After that, they go up about 5 percent a year with all of the additional money being used to pay off the principal. The term of the loan is 15 years.

You've read  of  free articles. Subscribe to continue.
QR Code to Mortgage tips for retirees
Read this article in
https://www.csmonitor.com/1983/0502/050233.html
QR Code to Subscription page
Start your subscription today
https://www.csmonitor.com/subscribe