|
Loan Program |
Advantages |
Disadvantages |
|
Fixed Rate Mortgages
(top) |
40 year fixed
30 year fixed
20 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
interest rate
- Higher
mortgage payments
- Rate does not
drop if interest rates improve
|
|
Adjustable Rate
Mortgages
(top) |
10/1 ARM
7/1 ARM
3/1 ARM
1 year ARM
6 month ARM
1 month ARM
Option 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
(top) |
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
(top) |
| |
- 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
(top) |
| |
- No closing
costs
- Less money
required to close
|
- Higher rates
- Higher
payments
|
|
Imperfect Credit
Programs
(top) |
| |
- 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
(top) |
| |
- 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
(top) |
| |
- Fixed
payments
- Interest may
be tax deductible
|
- Higher
interest rates than on 1st
mortgages
- Harder to
refinance your first mortgage
|
|
No point, No fee Programs
(top) |
| |
- No closing
costs
- Less money
required to close
|
- Higher rates
- Higher
payments
|
