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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