| Loan | Advantage | Disadvantage |
|---|
|
| 40, 30, 15 Year Fixed |
Monthly payments are fixed over the life of the loan
Interest rate does not change
You are safe if rates go up
Can refinance if rates go down
|
Higher interest rate
Higher monthly payments
Rate does not drop if interest rates improve |
| Adjustable Rate Mortgages (ARM) |
Lower initial monthly payment
Rates and payments may go down if rates improve
May qualify for higher loan amounts
|
More risk
Potential for higher payments if rates increase |
| Interest Only Programs |
You have several payment options each month
Lower monthly payments
Qualify for a higher loan amount
Option to pay the full normal payment
Lower interest only payments for up to ten years
|
Higher rates
Principal loan balance will not decrease during the interest only payment period
Payment will be higher for the remaining term
|
| Home Equity Line of Credit (HELOC) |
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 used for debt consolidation
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
|
| Home Equity Fixed Loan |
Fixed payments
Interest may be tax deductible
Get cash out for any purpose
|
Higher interest rates compared to first mortgage
Interest is paid on the entire loan amount, compared to an equity line of credit
|