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.