Below are the most common mortgage types available
today. Please contact us with
any questions or if you'd like advice on which type of financing
is best for you.
Adjustable Rate
| Fixed Rate | No Fee Programs
| Home Equity
Adjustable Rate Mortgages
With a fixed-rate mortgage, the interest rate
stays the same during the life of the loan. But with an ARM,
the interest rate changes periodically, usually in relation
to an index, and payments may go up or down accordingly.
Lenders generally charge lower initial interest
rates for ARMs than for fixed-rate mortgages. This makes the
ARM easier on your pocketbook at first than a fixed-rate mortgage
for the same amount. It also means that you might qualify for
a larger loan because lenders sometimes make this decision on
the basis of your current income and the first year's payments.
Moreover, your ARM could be less expensive over a long period
than a fixed-rate mortgage--for example, if interest rates remain
steady or move lower.
Against these advantages, you have to weigh the
risk that an increase in interest rates would lead to higher
monthly payments in the future. It's a trade-off--you get a
lower rate with an ARM in exchange for assuming more risk.
Adjustable rate mortgages are best for people
who plan on living in their home for only a few years.
| |
Advantages |
Disadvantages |
| |
 Lower
initial monthly
 payment
Lower
payment over a
shorter
period of time
May
qualify for higher
loan
amounts
Rates
and payments may
go
down if rates improve |
More
Risk
Potential
for high payments
if
rates go up
Payments
my change
over
time |
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Fixed Rate
Fixed rate mortgages are exactly
as their name says. Payments and interest rates remain fixed
throughout the life of the loan. Since the monthly payments
will remain the same, budgeting around your mortgage will be
much easier.
Fixed rate mortgages are best for
people who plan to live in their home for more than 10 years.
| |
Advantages |
Disadvantages |
| |
Fixed
monthly payment
Interest
rate remains fixed
Protected
if rates go up
Ability
to refinance if rates
go
down |
Higher
interest rate
Higher
mortgage payments
Rate
does not drop if
rates
improve |
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No Fee Programs
No fee or no closing cost loans have
gained popularity in the past few years. Basically, there is
no such thing as a no fee loan. Lenders, mortgage brokers, and
title companies incur costs in order to establish your mortgage.
In order to cover these costs in a no fee loan program people
are charged a higher interest rate. In almost all cases you
would be better off with a lower interest rate and pay the fees
required to close your loan.
A better option is to include the
closing costs in your new mortgage balance. This means you will
have the best interest rate you qualify for and not have any
out-of-pocket expenses to close on your loan.
| |
Advantages |
Disadvantages |
| |
No
closing costs
No
out-of-pocket expenses
|
Higher
interest rate
Higher
mortgage payments |
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Home Equity
Home equity loans utilize the equity in your home
for extra cash. Often this money is used to pay off other debt,
home improvements, vehicle purchase, etc.
Most people are better off refinancing their current
mortgage instead of obtaining a home equity line of credit.
