• Home
  • E-Booklets
  • Pay Less Tax
  • Privacy Policy
  • Cheatsheets
  • Contact Us
  • About us

Retirement Income

New Ways to Get More Retirement Income

  • Retirement Advisors
  • Retirement Insurance
  • Retirement Investing
  • Retirement Living
  • Retirement Planning

Non-traditional Mortgages Could Save You Money--or pay you like a Reverse Mortgage

Posted on January 2, 2009 by bobrichards

Use of nontraditional mortgages has increased among home buyers, according to a Wall Street Journal Online/Harris Interactive poll--could you benefit too?

There are four major types of non-traditional mortgages:

  1. Interest-only mortgages, which have received considerable media attention as home prices have skyrocketed, allow borrowers to pay interest but no principal during the early years of the loan.
  2. Piggyback mortgages combine a standard first mortgage with a home-equity loan or line of credit, thereby allowing the borrower to avoid paying private mortgage insurance or higher interest rates on jumbo loans.
  3. Miss-a-payment mortgages let borrowers skip up to two mortgage payments per year, and up to 10 payments over the life of the loan, without damaging their credit rating.
  4. Payment option mortgages give borrowers four-payment options--not when they take out the mortgage, but every single month.
    These include
    1) a payment based on a 30-year amortization table which, if made every month, will pay off the mortgage in 30 years;
    2) a payment based on a 15-year amortization table, which, if made every month, will pay off the mortgage in 15 years;
    3) an interest-only payment, in which the principal balance will remain unchanged; and
    4) a partial-interest payment, in which part of the interest is deferred and added to the principal balance.

The chart below illustrates the reduced payment on an interest-only loan.

Factors

Loan 1

Loan 2

Loan 3

Loan amount

$350,000

$350,000

$350,000

Interest rate

7%

6%

5%

Length of loan

30

30

30

Traditional monthly payment

$2,329

$2,098

$1,879

Interest-only monthly payment

$2,042

$1,750

$1,458

Source: Archer Pacific, as of October 2006 (www.archerpacific.com/compare%204%20mortgage%20loans%20calculator.html). This example is hypothetical. You may not be eligible for any of these loans, and if you are, interest rates on loans will vary based on your financial circumstances and prevailing interest rates.

If you want to buy more house than you can afford with a traditional mortgage, these options can be good tools, and more people are using them. The Wall Street Journal Online/Harris Interactive survey found increased usage of three of four types of nontraditional mortgages from 2005 to 2006.

But borrower beware: Non-traditional mortgages can be riskier than standard fixed-rate or adjustable-rate mortgages. For example, with payment option mortgages, borrowers who elect to make the minimum payment could see their loan balance rise, rather than fall. That's because the deferred principal and interest payments get tacked onto the home owner's total debt, a process known as negative amortization.

Specifically for seniors are reverse mortgages.  If you have sufficient equity, these will allow you to pay off your traditional mortgage and even pay you.

Financial professionals who seek to assist retirees with retirement income, visit ProspectMatch

How to Prosper and Thrive In Retirement

For those already retired seeking to improve their finances
  • The 4 most important issues for any retiree and a quick plan to address each
  • The overlooked annuitization of assets to make your money go farther and reduce risk
  • An easy way to save money on health coverage
  • You don’t need to be rich to plan your estate like this
  • A few simple lessons can reduce stress and bring more joy in your retirement year. Stop worrying and learn the simple
  • actions to take.

    You might also like:

    • Recession Can Be Good for Retirees - The Silver Lining of Recession
      Recession Can Be Good for Retirees - The Silver Lining of…
    • Bear Market - When Will It End?
      Bear Market - When Will It End?
    • Retired and Stocks Losing Value
      Retired and Stocks Losing Value
    • How to Pay Lower Taxes on IRA Distributions
      How to Pay Lower Taxes on IRA Distributions
    • When Will the Stock Market Recover
      When Will the Stock Market Recover

    Filed Under: Retirement Planning

    About bobrichards

    Bob Richards
    Editor | Involved in Various Marketing Positions within the Financial Services Industry

    Comments

    1. Best etf funds lit says

      April 12, 2009 at 9:12 am

      If they use interest only moratge thier mortgage could go up after next rate increase if it is adjustable. I know some of the problems happened to people doing this and they would owe more money and payments would go up.

      Best etf funds lits last blog post..Oil etf.

      Reply
    2. Brian Gosur says

      June 30, 2009 at 9:22 am

      Great Post. I especially found it useful when you stated that these none traditional loans can be risky. So many people are in crisis modes right now and are easy prey to find some sort of relief.
      I have a client of mine who is on an interest only loan. He is sixty five and the principle amount of his mortgage continues to go up. He is trying to put a couple of hundred dollars on the principle each month, but it is not helping his situation. He will never pay that mortgage off.
      These are facts that people need to know.

      Thank you for your post. I look forward to reading more.

      Reply
    3. Dom says

      July 28, 2009 at 3:23 am

      This is great advice, thanks!

      I recently came across a series of five videos put together by the AARP, the membership organization for those that are aged 50+.

      I have grouped these videos together, they really are worth a look - each one is packed with useful information:

      and so on.

      Thanks again, keep up the good work!

      Dom

      Reply
    4. Dave says

      September 17, 2009 at 4:29 am

      Thanks for sharing, I only know a bit about reverse mortgages before reading your post 🙂

      Reply
    5. Equity Release Specialist says

      November 2, 2009 at 5:23 am

      'Reverse Mortgages' or Equity Release Schemes as they are called in the UK are becoming more and more popular. When you look at the retirement income provision of most of the population (here in the UK he adverage fund is supposedly £40,000), it beggars belief how some people even survive given the rising energy costs we are all facing!

      Reverse mortgages, i believe, really help certain people out by, as you say, clearing off existing mortgages and potentially paying you an excess over this amount. Surely that has to be a good thing for many who are struggling to survive. But then as this interest is rolled up into one giant loan paid off on death - I just hope the people doing it let their kids know! Great post by the way, really simple advice which I too give to my clients.

      Reply
    6. Johnv3210 says

      November 18, 2009 at 1:19 am

      I got a nice short overview of the options that are available, I hadnt put interest into it before, but find some new ways, new possibilities, I have a 30-year mortage on me btw.
      John

      Reply
    7. Houston Mortgage says

      February 15, 2010 at 1:00 pm

      Reverse mortgages are becoming more and more popular as seniors evaluate options to maintain their lifestyle. In my opinion, if they want to use up their equity and leave nothing to their kids, that's their perogative. I know that if my parents wanted a reverse mortgage, I wouldn't be upset, it's their home.

      Regards,
      Chad

      Reply
    8. quick mortgage says

      March 2, 2010 at 4:52 am

      with people wanting bigger more expensive properties people are risking going away from traditional mortgages and quite a few people have paid the price and lucked out. If you can’t get a traditional mortgage then these other options are there but as a consumer you have to make sure you can pay the monthly repayments and watch the interest rates as depending on what you got could change.

      Reply
    9. Ross says

      March 23, 2010 at 4:39 am

      Interesting post. However on the topic of reverse mortgages retired people need to think long & hard. I know of several retired couples who took out reverse mortgages. Their circumstances changed and they needed to change their accommodation only to discover that the original principal plus interest accrued had grown so much over a number of years that they were stuck. Insufficient funds would have been left to purchase the newer accommodation by the time the reverse mortgage was paid out.

      No doubt a reverse mortgage may suit some people. However once committed there is not much room to turn back.

      Reply
    10. weber gas grills on sale says

      May 6, 2010 at 8:04 am

      Reverse mortgages are happening all the time. I think seniors are entitled to do what they want with their equity. They have after all worked all their lives to generate the savings.

      Reply
    11. Kids Rolling Suitcases says

      May 19, 2010 at 9:09 pm

      It seems like these reverse mortgages are becoming more mainstream because I am beginning to hear a lot more about them, and even seeing commercials on TV for them. I was listening to a financial advice radio show the other day when someone called into ask advice on a reverse mortgage, the host said that it really depends on your individual situation, but for some people they could really provide some benefit. I'm not all that familiar with those other types though, except for the interest only mortgages, I know those were very popular during the real estate boom.

      Reply
    12. Jim Jones says

      June 11, 2010 at 1:34 pm

      I agree that it is at the discretion of the owner whether or not they execute a reverse mortgage deal, my only concern would unscrupulous LOs/brokerages that may mis-lead or omit certain details when pitching the product that could potentially devastate the consumer later down the road. I'm sure eventually we will get to the point where companies are forced to operate transparently, but until then, buyer beware...

      Reply
    13. [email protected] says

      June 30, 2010 at 12:38 am

      Nice Post. It is really true, you can save Money–or pay you like a Reverse Mortgage.

      Reply
    14. Utility Warehouse says

      August 3, 2010 at 2:13 am

      Reverse mortgages are becoming popular in America. HUD's Federal Housing Administration (FHA) created one of the first. The Home Equity Conversion Mortgage (HECM) is FHA's reverse mortgage program which enables you to withdraw some of the equity in your home. The HECM is a safe plan that can give older Americans greater financial security. Many seniors use it to supplement social security, meet unexpected medical expenses, make home improvements and more. You can receive additional free information about reverse mortgages in general by contacting the National Council on Aging at (800) 510-0301 or downloading a free booklet, "Use Your Home to Stay at Home," a guide for older homeowners who need help now. Since your home is probably your largest single investment, it's smart to know more about reverse mortgages, and decide if one is right for you!

      Reply
    15. net branch says

      August 25, 2010 at 9:33 pm

      A reverse mortgage really saved our bacon last year. If the numbers work and your in need then there is no better way to go.

      Reply
    16. [email protected] says

      September 24, 2010 at 3:20 am

      Nice read here. A lot of people are not aware that there can be some better way on mortgages. This article will help them enlighten their views. Thanks for posting.

      Reply

    Leave a Reply Cancel reply

    Your email address will not be published. Required fields are marked *

    Second place winner best retirement blog

    SH award winner SMALL (1)

    Not Enough Savings to Retire?
    Learn Six Ways to Earn Retirement Income (from home)

    You do not need special talents, skills, computer knowledge, etc. We show you multiple ways others are working a few hours a week to generate a comfortable retirement income.

    Download Free Copy

    Latest Posts

    Recession Can Be Good for Retirees - The Silver Lining of Recession

    Recession Can Be Good for Retirees - The Silver Lining of Recession

    Bear Market - When Will It End?

    Bear Market - When Will It End?

    When Will the Stock Market Recover

    When Will the Stock Market Recover

    How to Pay Lower Taxes on IRA Distributions

    How to Pay Lower Taxes on IRA Distributions

    Retired and Stocks Losing Value

    Retired and Stocks Losing Value

    Categories

    • 401K IRA Roth Withdrawals, Distributions, and Rollovers
    • Annuities for Income
    • Estate Planning
    • Retirement Advisors
    • Retirement Insurance
    • Retirement Investing
    • Retirement Living
    • Retirement Planning
    • Social Security
    • Supplemental Retirement Income
    • Tax Savings
    • Alternative Investments
    • E-Booklets
    • Pay Less Tax
    • Privacy Policy
    • Cheatsheets
    • Contact Us
    • Subscribe
    • Sitemap

    Recent Posts

    • Recession Can Be Good for Retirees - The Silver Lining of Recession
    • Bear Market - When Will It End?
    • When Will the Stock Market Recover
    • How to Pay Lower Taxes on IRA Distributions
    • Retired and Stocks Losing Value

    The Retirement Income Blog

    25A Crescent Drive #1508
    Pleasant Hill CA 94523
    T: 844-887-4131
    E: [email protected]

    © 2018 Retirement Income