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| Fixed Rate Mortgages |
Advantages |
Disadvantages |
30 year fixed
15 year fixed
5/1 ARM |
- 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
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| Adjustable Rate Mortgages |
Advantages |
Disadvantages |
10/1 ARM
7/1 ARM
3/1 ARM
1 year ARM
6 month ARM
1 month 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
|
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| Balloon Mortgages |
Advantages |
Disadvantages |
7 year
5 year |
- Lower initial monthly payment
- Lower payment over a shorter period of time
- Fixed for the first 5 or 7 years
- Many balloon mortgages offer the option to convert to a new loan after the initial term.
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- 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
|
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| Stated Income Programs |
Advantages |
Disadvantages |
| |
- Don't need to verify income
- Faster approval and closing
- Less paperwork
|
- Higher rates
- Higher down payment (usually 10% but can vary)
|
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| No point, No fee Programs |
Advantages |
Disadvantages |
| |
- No closing costs
- Less money required to close
|
- Higher rates
- Higher payments
|
|
| Imperfect Credit Programs |
Advantages |
Disadvantages |
| |
- 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
- Potential to pay consumer debt on time with debt consolidation.
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- Higher rates
- Loan terms may not be as favorable
- Harder to get long term fixed loans
- Loans may have prepayment penalties
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| Home Equity Line of Credit |
Advantages |
Disadvantages |
| |
- Interest rates aer lower
- 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
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| Home Equity Fixed Loan |
Advantages |
Disadvantages |
| |
- Fixed payments
- Interest may be tax deductible
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- Higher interest rates than on 1st
mortgages
- Harder to refinance your first mortgage
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