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Advantages &
Disadvantages |
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Fixed
Rate Mortgages
15
year fixed
30 year fixed
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- Fixed monthly investment.
-
Fixed interest rate.
- Fixed rate mortgages are protected against interest and monthly payment
increases.
|
- Higher
interest rate compared
to ARM introductory
rates.
-
Higher
rate compared to two and
three year, fixed/adjustable rate
loans
-
Longer
term mortgages should be
obtained if you plan not
to move or refinance in
the foreseeable future.
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Fixed/Adjustable Rate Mortgages
2
yr fixed/28 yr ARM
3 yr fixed/27 yr ARM
|
- Provides
the security of a fixed
interest rate and a
fixed monthly investment for the first two or
three years.
-
For most people trying to improve
their credit, two to
three years is plenty of
time.
|
- Converts
to an ARM loan at the
end of the fixed rate
period.
-
Interest rate and
monthly payment can
increase after the
initial fixed rate
period.
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Adjustable
Rate Mortgages
10/1
ARM
7/1 ARM
5/1 ARM
3/1 ARM
|
-
Lower
initial monthly
investment.
-
May
qualify for higher loan
amounts.
-
Lower
payment over a shorter
period of time
-
Rates
and payments may go down
if rates improve.
|
- Risk of
higher monthly payments
if rates go up.
- Payments
may change over time.
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Balloon
Mortgages
15
year
(30 yr. fixed,
due in 15)
40 year
(40 yr. fixed, due in 30)
|
-
Lower
initial monthly
investment.
-
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 the balloon
payment, refinance or
exercise the conversion
option.
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Home
Equity Line of Credit
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-
You only borrow what you
need.
- Access to funds as needed.
-
You pay interest only on what
you borrow.
-
Interest may be tax deductible.
|
-
Rates
can change. The
maximum interest rate
is normally high.
-
Payments
can change
monthly.
-
Harder to refinance your
first mortgage
|
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Home
Equity Fixed Loan
|
- Fixed
payments.
- Receive
one lump sum at
closing.
- Interest
may be tax deductible.
|
-
Higher
interest rates
compared to first
mortgages.
-
Harder to refinance your
first mortgage.
|
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Stated Income/Asset
or
No Income/Asset
Programs
|
- No tax
returns or W-2s
-
No proof of assets.
-
No verification of
income.
-
Fast approval.
|
-
Higher interest rates.
-
Higher down payment.
-
Higher
credit score may be
required for some
programs.
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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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