| Loans |
Advantages |
Disadvantages |
| Fixed-rate mortgages |
Predictable monthly payments
Less risk if market conditions cause rates to rise
Rate does not change |
You pay more in interest
Higher interest rate
Unable to take advantage of lower interest costs if market changes to lower rates |
| Adjustable rate mortgages |
Flexibility
Lower initial monthly payment
You pay less for short term ownership
May be easier to qualify for higher loan amounts |
More risk
Inability to predict future housing costs
Potential higher payments (at max. interest rate) |
| Stated income mortgages |
Don't need to verify income |
Higher rates
Need a low LTV to qualify |
| Combination loans (such as an 80/10/10) |
Avoid PMI
Potential tax advantages |
Avoid PMI
Potential tax advantages
Possibly higher monthly payments
Two monthly payments instead of one |
| Home equity line of credit |
Flexible access to funds
Potential tax advantages
You only draw what you need
You only pay interest on what you borrow |
Ties up equity making it unavailable for other needs
Higher interest rate than a first mortgage |
| Home equity loan |
Predictable fixed payments
Possible tax advantages |
Ties up equity making it unavailable for other needs
Higher interest rate than a first mortgage
Cannot pay down and withdraw additional funds |
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