Fixed-Rate Mortgages
Usually we have 30-year,
20-year, and 15-year, fixed-rate loans. These loans usually come
with no pre-payment penalty and are an excellent choice when rates
are low - like right now!
Advantages: The
rate will stay the same for the life of the loan. If you can secure
a fixed-rate loan when interest rates are low, you'll be sitting
pretty if and when rates go back up.
Disadvantages:
Interest rates and total interest paid will be higher than with
an adjustable-rate loan, and you have less flexibility in the
event that rates go down.
Adjustable-Rate Mortgages
We have 1-year fixed,
3-year fixed, 5-year fixed, and 7-year fixed adjustable mortgages.
These loans are usually lower than what you would obtain with
a 30-year fixed-rate loan. After the fixed period the loan becomes
adjustable, with a rate that reflects the rates available at that
time.
Advantages: You may
be able to get into a bigger, more expensive home with lower initial
monthly payments. If you believe it is likely you will be selling
before the end of the fixed-rate period, this could be an excellent
way to minimize your monthly housing expenses and improve your
cash flow.
Disadvantages: With
an adjustable-rate mortgage you will have less stability in terms
of interest rates and monthly payments. If your risk-tolerance
is low or you plan to stay in the home for a significant period
of time, this may not be your best choice.
Interest-Only Mortgage Loans
These loans are fixed
for a pre-determined term then become adjustable, and have the
lowest monthly payment of most loan programs, as the monthly payment
is only paying the interest.
Advantages: Similar
to a traditional ARM, you may be able to get into a bigger, more
expensive home with lower initial monthly payments. This is a
good way to go for the short-term buyer, who will sell or refinance
in a short period of time.
Disadvantages: The payments
are only servicing the loan interest, and therefore the mortgage
will never be paid down with this loan. |