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 |
Pros |
Cons |
| Fixed-rate 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.
|
The size of your loan may be limited.
|
| VA loan
|
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.
|
| Balloon mortgage
|
Usually a fixed rate loan with relatively low payments for a certain period of time
(about 5-7 years).
|
After an initial period, the entire balance of the loan is due immediately This type
of loan is risky.
|
| Interest-only |
Borrower pays only the interest on the loan, in monthly payments, for a fixed term
(about 5-7 years).
|
After an initial period, the balance of the loan is due. This usually means much
higher payments, paying a lump sum or refinancing.
|
