|
Loan
Program
|
Advantages
|
Disadvantages
|
| Fixed
Rate Mortages
* 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
|
|
Loan
Program
|
Advantages
|
Disadvantages
|
| Adjustable
Rate
Mortgages
|
| - 10/1
ARM |
| -
7/1 ARM |
| - 5/1 ARM |
| - 3/1 ARM |
| - 1 year
ARM |
| - 6 month
ARM |
| - 1 month
ARM |
|
Lower
initial monthly payment
Rates and payments
may go down if rates improve
May qualify for
higher loan amounts
30 year term , no
balloon payment
|
More
risk
Payments may change
over time
Potential for
higher payment if rates
increase
|
|
Loan
Program
|
Advantages
|
Disadvantages
|
| Balloon
Mortgages
* 7 year
* 5 year
|
Lower
intial monthly payment
Lower payment for a
predetermined 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, refinance, or
exercise the conversion
Balloon payment
requires to sell or
refinance after term, as
opposed to a 7/1, 5/1
program with a 30 year term
|
|
Loan
Program
|
Advantages
|
Disadvantages
|
| First
Time Buyer Program
|
Lower
down payment
Easier to qualify
Lower rates may be
available
|
May
be subject to income property
limitations
Some government
subsidiary programs may
generate or recapture tax if
you sell the house too soon
Education courses
may be required to qualify
for these loans
|
|
Loan
Program
|
Advantages
|
Disadvantages
|
| Stated
Income Programs |
Don't
need to verify income
Faster Approval
Good for borrowers
who may not qualify with a
full income documentation
program
|
Higher
rates
Higher down payment
|
|
Loan
Program
|
Advantages
|
Disadvantages
|
| Interest
Only Programs |
You
have several payment options
Lower monthly
payments
Qualify for a
higher loan amount
Qualify at the
interest only payment
Option to pay the
full normal payment
Interest only
payments for ten years
|
Higher
rates
Principal loan
balance will decrease during
the interest only payment
period
Payment will be
higher for remaining term
|
|
Loan
Program
|
Advantages
|
Disadvantages
|
| No
point, No fee programs |
No
out-of-pocket loan costs at
closing
Closing costs are
paid from the lender rebate
Less money required
to close
Refinance without
increasing your loan amount
|
Higher
rates
Higher payments
Some lenders may
have short payoff penalty
which is usually charged to
the loan broker, but may be
passed to you
Some require a
prepayment penalty for the
first one to five years
|
|
Loan
Program
|
Advantages
|
Disadvantages
|
| 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 loans
Loans may have
prepayment penalties
|
|
Loan
Program
|
Advantages
|
Disadvantages
|
| 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
May be free of
closing costs
A good source for
an emergency fund, if set up
in advance
Can be use for debt
consolidation and lower
payments
Rates are usually
lower than consumer loan or
credit card rates
|
Rates
can change. The maximum
interest rate can be
relatively high
Payments can change
Harder to refinance
your mortgage
|
|
Loan
Program
|
Advantages
|
Disadvantages
|
| Home
Equity Fixed Loan |
Fixed
payments
Interest may be tax
deductible
Get cash out for
any purpose
|
Higher
interest rates compared to
first mortgage
Harder to refinance
your mortgage
Interest is paid on
the entire loan amount,
compared to equity line of
credit
|
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