We sold our house.

WHICH LOAN PROGRAM IS RIGHT FOR YOU?

 

Years you plan to stay in the home Recommended loan program
 1-3  3/1 ARM, 1 year ARM or 6 month ARM
 3-5  5/1 ARM
 5-7  7/1 ARM
 7-10  10/1 ARM, 30 year fixed or 15 year fixed
 10+  30 year fixed or 15 year fixed

Loan Programs        Advantages         Disadvantages
Fixed Rate Mortgages

30, 25, 20, 15 & 10 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
  • payment stability
  • Higher interest rate
  • Higher mortgage payments
  • Rate does not drop if interest rates improve

 

Adjustable Rate Mortgages

10/1 ARM

7/1 ARM

5/1 ARM

3/1 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
  • Rate is "fixed" for period of time
  • More risk than fixed
  • Payments may change over time
  • Potential for high payments if rates go up
Balloon Mortgages
<7 year
5 year
  • 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.
  • 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
First Time Buyer Programs
 
  • Lower down payment
  • Easier to qualify
  • Sometimes you may get lower rate
  • 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.
No point, No fee Programs
 
  • $0 closing costs
  • Less money required to close
  • lower APR 
  • Slightly higher rates
  • Slightly higher payments
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
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
Home Equity Fixed Loan
 
  • Fixed payments
  • Interest may be tax deductible
  • Higher interest rates than on 1stmortgages
  • Harder to refinance your first mortgage