MORTGAGE PROGRAMS

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PROGRAM         PROS.        CONS.
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CONVENTIONAL

FIXED RATE
  • Do not suffer when market rates rise
  • Predictable P&I payment
  • Do not benefit when market rates fall
  • Initial interest rate is higher than ARM

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ARM
  • Payments decline when market rates fall
  • Low initial rate, compared to fixed rate
  • Payments increase when rates rise
  • No stability; payments change over time


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FIRST TIME
  • Allow for a very low (or no) down payment 
  • Easier to qualify
  • May be subject to income and property value limitations 
  • Some programs which have government subsidies may have a recapture tax if you sell the house too early. 


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FIXED-RATE BALLOON
  • Do not suffer when market rates rise
  • Predictable P&I payment
  • Lower interest than conventional fixed rate
  
  • Do not benefit when market rates fall
  • Initial rate may be higher than ARM
  • May need to refinance to pay off balloon
  • Rates at payoff could be unattractive

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INTEREST-ONLY LOAN
  • Do not suffer when market rates rise 
  • Predictable P&I payment
  • Lower monthly payments
  
  • Do not benefit when market rates fall
  • Initial rate may be higher than ARM
  • Must refinance, renew, or repay early
  • No debt reduction through amortization




GTH Architects, Union Pier, MI
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