Lining up a mortgage for that retirement home

''They are shocked. That's the only word to use.'' That's how James R. Minnix describes a common reaction among people looking for a mortgage to finance their retirement home. For many older people, he says, the world of home buying and mortgages is one they have not visited for at least a decade. Mr. Minnix is vice-president and manager of the mortgage division at First Federal Savings & Loan in Jacksonville, Fla.

The last time many people nearing retirement were in the home-buying market, there was just one mortgage: the fixed-term (usually 30 years), fixed-rate (well under 10 percent) variety.

Now, Mr. Minnix says, ''there are from five to 75 different types of lending programs. And all of these require mountains of paper work, disclosure statements, regulations, and other legal documents that the retirees have to go through.''

Also, the interest rate shocks them. ''Whereas it was about 7 percent in 1970 -71, now it's 12 or 13 percent,'' he notes. ''And a year ago it was as high as 16 or 17 percent.''

Still, people reentering the housing market to buy their retirement home are finding that despite the surprises, it is still possible to finance that purchase, if they need to.

It is still possible, for instance, to obtain the basic 30-year, fixed-rate mortgage, even if it is more expensive. Reports of its demise a year or two ago were premature. The combined demands of home buyers and investors for a stable cost or return have kept this type of mortgage alive - at least as long as interest rates stay in the low teens.

''A lot of investors like stability just as much as homeowners,'' says R.J. Turner, a real estate broker in Washington, D.C. The individuals and institutions that ''buy'' mortgages from lenders ''are used to a constant return on their investment,'' he says. Mr. Turner is the author of ''The Mortgage Maze: The Complete Guide to the Risks and Rewards of Creative Real Estate Financing'' (Alexandria House Books, Arlington, Va., $19.95).

If you need to finance a retirement home, it is probably best for those with limited incomes to go after a fixed-payment mortgage. Many, if not most, retirees have to live on incomes that at least in part do not move up with inflation. So they should have a mortgage that also remains stable. With an adjustable-rate mortgage, there is a danger of the cost rising if interest rates move up.

For a majority of retired home buyers, of course, finding a mortgage is not a problem. They simply don't need one.

''About 60 percent of the people buying homes around here pay cash,'' says Clark Cederlof, executive vice-president at Western Savings & Loan Association in Phoenix, Ariz. These people sold the homes they lived in before retirement and took all or part of the proceeds to buy the retirement home. Or, in the case of wealthier individuals, they took the money out of savings or other investments.

That may not always be a good idea, however, Mr. Turner contends. He says the deductible interest payments on the mortgage can serve as a tax shelter against the homeowner's retirement income.

''The government is going to tax much of this income,'' he says. ''You should use the interest to add to your deductions.''

For those planning to retire in 10 or 15 years, an increasingly popular vehicle is the growing-equity mortgage (GEM). With this one, the buyer makes a sizable down payment on the retirement home, sometimes as much as a third of the purchase price.

In the first two or three years of the GEM loan, the monthly payments stay the same. After that, they go up about 5 percent a year, with the additional money used to pay off the principal. With 5 percent annual increases, the house is paid off in 176 monthly installments, or less than 15 years.

For people in their early to mid-50s, probably at the height of their earning power and at an age when their children are likely to be out of college, increasingly large payments may not be a heavy burden. And the house may be almost completely paid off when retirement actually comes.

Another pre-retirement strategy can sometimes be used by people who would otherwise pay for the retirement home all at once. They can take out a mortgage - with no prepayment penalties - on a house or condominium, try it for a year or two or perhaps spend winters there, and decide if they like the house and the area.

If they do like it, they can pay off the mortgage, either by selling their first house or by using cash that has been kept in other investments. If they want to leave they can sell the house, probably at a profit.

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