Common Types of Home Mortgages
Fixed rate and adjustable rate mortgages are the two main types of mortgages, but there is a wide variety of other mortgage products available. Below are pros and cons of just a few of the mortgage products you may want to consider.
|Type of Mortgage
||No surprises. The interest rate stays the same over the entire term, usually 15, 20 or 30 years.
||If interest rates fall, you could be stuck paying a higher rate.
|Adjustable-Rate (ARM) or Variable-Rate Mortgage
||Usually offers a lower initial rate of interest than fixed-rate loans.
||After an initial period, rates fluctuate over the life of the loan When interest rates rise, generally so do your loan payments.
|FHA (Federal Housing Administration) Loan
||Allows buyers who may not qualify for a home loan to obtain one Low down payment.
||size of your loan may be limited.
||Guaranteed loans for eligible veterans, active duty personnel and surviving spouses Offers competitive rates, low or no down payments.
||The size of your loan may be limited.
||Usually a fixed rate loan with relatively low payments for a fixed period.
||After an initial period, the entire balance of the loan is due immediately This type of loan may be risky for some borrowers.
||Borrower pays only the interest on the loan, in monthly payments, for a fixed term.
||After an initial period, the balance of the loan is due. This could mean much higher payments, paying a lump sum or refinancing.
||Allows seniors to convert equity in their homes to cash; you don’t have to pay back the loan and interest as long as you live in the house.
||Subject to aggressive lending practices and false advertising promises, particularly by lenders that prey on seniors. Check to make sure the loan is Federally insured.
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