Retirement News : Seniors : Seniors Not Getting The Whole Story on Mortgages

Seniors Not Getting The Whole Story on Mortgages

Date Added: 27-09-2005

New opportunities for seniors to acquire ready money may not be as safe as they first appear.  Read the excerpt below:

SeniorJournal.com - San Antonio,TX,USA

By Jeffrey D. Voudrie, CFP
President, Legacy Planning Group

Sept. 26, 2005 -- Financial salespeople such as investment advisors and mortgage brokers are recommending ‘new’ types of mortgages to senior citizens and baby boomers for improving cash-flow, freeing up money to invest, and having money to take that dream vacation. Their sales pitches sound so enticing. But here’s what they don’t tell you.
  
In the past, the only decision to make when getting a mortgage was whether you wanted a fixed or adjustable rate. Now, seniors are being pitched interest-only mortgages, option-ARMs and reverse mortgages. It’s easy to become confused and overwhelmed. The result is you can spend thousands of dollars in fees and end up with a mortgage that doesn’t meet your needs.

In a traditional mortgage, part of each monthly payment covers interest while the rest goes to pay down the principle amount you borrowed. With each payment you are decreasing the amount you owe and increasing your equity.

Interest-only, option-ARMs and reverse mortgages function quite differently from the traditional mortgage. Instead of decreasing the amount you owe, you will most likely be maintaining the same level of debt. In some cases you will actually be increasing the amount you owe—you will be going further into debt with each payment you make!

With an interest-only mortgage, you pay the amount of interest due each month for the first 10 years. This is still a 30-year mortgage, but you don’t begin paying down principle until year 11. Since there isn’t any money going to principle, your monthly payments will be less than with a traditional mortgage only during those first 10 years.

Read the entire article:

http://www.seniorjournal.com/NEWS/Money/5-09-26Seniors-Mortgages.htm