| RESID. PROGRAMS | PROS | CONS |
| Fixed Rate Mortgages | Monthly payments are fixed over the life of the loan.
Your interest rate does not change, so you're protected if rates go up.
You can refinance if rates go down.
10,15,20, 30 and 40-year options. | Interest rates are higher, resulting in higher mortgage payments.
Rate does not drop if interest rates improve. |
| Adjustable Rate Mortgages
7/1 ARM
5/1 ARM
3/1 ARM
1 year ARM | Lower monthly payments.
Rates and payments may go down if rates improve.
May qualify for higher loan amounts.
Fits mobile lifestyles. | Payments may change over time.
Potential for higher payments if rates go up. |
| Balloon Mortgages | Lower payments over a shorter period of time.
Many balloon mortgages offer the option to convert to a new loan after the initial term.
5 or 7-year term. | Risk of rates being higher at the end of the initial fixed period.
Risk of foreclosure if you cannot make balloon payment, refinance or exercise the conversion option. |
| First Time Home Buyers | Lower down payment.
Easier to qualify.
Sometimes you may get lower rate. | May be subject to income and property value limitations.
Some programs that have government subsidies may have a recapture tax if you sell the house too early. |
| Cash Out Refinance | Allows you to receive cash from the equity in your home.
You can consolidate debt and lower total monthly payments.
Offers revolving lines of credit using real estate as collateral. | Monthly payments may be higher.
Typically higher rates. |
| Home Equity Line of Credit
(HELOC) | You only borrow what you need.
Pay interest only on what you borrow.
Operates similar to a credit card. Flexible access to funds. | Rates can change. The maximum interest rate is normally high.
Payments can change.
Harder to refinance your first. |
| Reverse Mortgages | Increases cash flow for homeowners age 62 and above.
No monthly payments required.
Owners can receive lump sum, monthly payments, lines of credit (in some states) or a combination. | Clients must take a course to be eligible.
Heirs may be opposed.
If client moves, the loan must be paid back. |