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
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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
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Balloon Mortgages
7 year
5 year
| • Lower initial monthly payment
• Lower payment over a shorter period of time
• Some 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
• Must be able to refinance or come up with the balloon amount after the |
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| Interest Only Programs | • Lowest monthly payment possible
• Allows for larger loan amounts
• Greatly improves cash flow
| • No monthly principal reduction
• Potential for negative equity if housing market softens |
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| 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. |
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| Stated Income, Stated Asset Programs | • Don’t need to verify income and/or assets
• Don’t need two year job verification
• Faster approval
| • Higher rates
• Higher down payment |
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| No point, No fee Programs | • No closing costs
• Less money required to close
| • Higher rates
• Higher payments |
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| 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 |
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| 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 |
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| Home Equity Fixed Loan | • Fixed payments
• Interest may be tax deductible
| • Higher interest rates than on 1st mortgages
• Harder to refinance your first mortgage |
