|
Loan Programs
|
Advantages
|
Disadvantages
|
Fixed Rate Mortgages
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 interest
rate •Higher
mortgage payments •Rate
does not drop if interest rates improve |
Adjustable Rate Mortgages 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 |
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 rates |
•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 |
