30 year fixed
15 year fixed |
- Monthly payments are fixed over the life of the loanInterest 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
- Rate does not drop if interest rates improve
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10/1 ARM
7/1 ARM
3/1 ARM
1 year ARM
6 month ARM
1 month 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
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- More risk
- Payments may change over time
- Potential for high payments if rates go up
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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.
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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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