· 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
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· Higher interest rate
· Higher mortgage
payments
· Rates do not drop if interest rates improve
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· 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
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· More risk
· Payments may change over time
· Potential for high payments if rates go up
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· Payment based on a rate as low
as 1.25%
· You choose your payment each month depending on your cash
flow
· Interest only option
· Great for self employed or
commissioned borrowers.
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· May be subject to income and property value limitations
· May need to have a larger down payment.
· Risk of negative
amortization is possible with the lowest payment.
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· 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.
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· 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
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· Lower down payment
· Easier to qualify
· Sometimes you may get lower rate
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· 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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· Don't need to verify income
· Faster approval
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· Higher rates
· Higher down payment
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No point, No fee
Programs |
· No closing costs
· Less money required to close
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· 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
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· 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
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· Higher interest rates than on
1st mortgages
· Harder to refinance your first mortgage
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