|
Fixed Rate Mortgages |
| Loan Programs |
Advantages |
Disadvantages |
| 30 year
fixed 15 year fixed |
Monthly payments are fixed over
the life of the loan
Interest rate does not change
Protected if rates go up
Can refinance if rates go down |
Higher mortgage payments
Rate does not drop if interest
rates improve
Higher interest rate |
 |
|
Adjustable Rate Mortgages |
10/1 ARM
7/1 ARM
3/1 ARM
1 yr ARM
6 month ARM
1 mo ARM |
Lower initial monthly payment
Lower payment over a shorter
period of time
Rates and payments may go down
if rates improve
May qualify for higher loan
amounts |
More risk
Payments may change over time
Potential for high payments if
rates go up |
|
Balloon Mortgages |
7 year
5 year |
Lower initial
monthly payment
Lower payment over a shorter
period of time
Many balloon mortgages offer
the option to convert to a new loan after the initial
term. |
Risk of rates
being higher at the end of the initial fixed period
Risk of foreclosure if you
cannot make balloon payment or if you cannot refinance
or if you cannot exercise the conversion option
|
|
First Time Buyer Programs |
| |
Lower down
payment
Easier to qualify
Sometimes you may get lower
rate |
May be subject to
income and property value limitations
Some programs which have
government subsidies may have a recapture tax if you
sell the house too early. |
|
Stated Income Programs |
| |
Don't need to
verify income
Faster approval |
Higher rates
Higher down payment
|
|
No point, No fee Programs |
| |
No closing costs
Less money required to close
|
Higher rates
Higher payments |
|
Imperfect Credit Programs |
| |
Potential for
reestablishing credit if you pay your mortgage on time.
When used for debt
consolidation, you may be able to reduce your monthly
debt payment |
Higher rates
Terms may not be as favorable
Harder to get long term fixed
loans
Loans may have prepayment
penalties |
|
Home Equity Line of Credit |
| |
You only borrow
what you need
Pay interest only on what you
borrow
Flexible access to funds
Interest may be tax deductible
|
Rates can change.
The maximum interest rate is normally high.
Payments can change
Harder to refinance your first
mortgage |
|
Home Equity Fixed Loan |
| |
Fixed payments
Interest may be tax deductible
|
Higher interest
rates than on 1st mortgages
Harder to refinance your first
mortgage |
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