by Ralph Lawrence

Created on: July 25, 2008   Last Updated: August 07, 2008

A NEW GENERATION OF RETIREES.

This new generation of older Americans actively planning retirement is not like the traditional concept of what retirees want and need. With an individualistic nature, these "boomers" have redefined boundaries of age and leisure interest. Seventy is equated with fifty to sixty. Any one under 60 is still in life's learning curve. This contemporary attitude demands that a financing specialist assisting borrowers in the purchase of a new retirement home weigh many factors in the choice and terms of product available. Income, family concerns, personality and past investment strategies all factor into the decision.

As a general rule, if the road chosen includes mortgage financing, borrowers will find that the best interest rates are available to those who are still in the workforce or have substantial retirement income in the form of pensions, annuities and/or investments. Often, proceeds from the sale of an existing home could boost one's financial picture. Today, lenders require larger down payments and less personal debt in the purchase of a new home.

The fully qualified borrower with sizable liquid assets might choose based primarily on age. If financing is chosen versus buying for cash, one might recommend that a 55 year old take a 15 year fixed mortgage so that at age 70, the debt is satisfied and the mortgage payment ceases. For an older retiree, say 65, this product might not be suitable because payoff would not occur until age 80. Others needing financing might be content with a 30 year fixed mortgage, which is appealing because of the lower monthly payment. Those concerned with "jumbo" mortgage products often decide that the adjustable rate mortgage, or ARM, which carries the lowest interest rate on a temporary basis, would be a wise choice for larger mortgages.

Personality also plays a large part in a borrower's choices. Some have concerns about protecting assets for distribution in an estate upon death. In many cases, the home itself is the largest resource. Retirees attempt to protect what they have accumulated over a long period of time, earmarking the same as a legacy for their heirs. In such instances, purchasing the home outright, especially if that action strips most liquid assets from the borrower, is unwise. A reasonably priced mortgage, which yields a concurrent tax write off and a conservative yearly appreciation in property value, makes the most sense. The offset of the fixed mortgage rate and the capital gain in the home assist in staying ahead of inflation. But, most tax experts warn, carrying a mortgage just for the sake of a tax deduction is a losing proposition in the long run.

As always, borrowers must be cognizant of the income, financial stability and credit requirements associated with obtaining a mortgage. Laws governing occupancy and taxes vary with each state and each municipality. Recently, insurance has become a problem in some areas where there have been episodes of nature. Choose the financing you find most comfortable. Make doubly sure that the mortgage broker has obtained the best interest rate available, and that fees are reasonable, if any are charged at all.

Each circumstance must stand the test of suitability for every retiree. Affordability, sensibility and forward planning are necessary ingredients to insure a secure comfort zone. If mortgage financing is the preferred method, include all calculations for principal, interest, taxes and insurance. Add any association fees or assessments. Be conservative in those deliberations. The lender will! Finally, choose wisely based on you, the borrower, needs and wants. If it is a winter hideaway, a summer retreat or a new beginning, plan well and enjoy.

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