Types of Home Mortgages

Types of Mortgage

While the different choices may seem overwhelming at first, the overall goal is simple: you want to find a loan that fits both your current financial situation and your future plans. Below are different types of mortgages. 

Fixed-Rate Mortgage 

Pros:The interest rate stays the same over the entire term, usually 30 years. 

Cons: If the interest rate falls, you may be stuck paying a higher rate

Adjustable-rate or variable-rate mortgage

Pros:Offers a lower initial rate of interest that fixed-rate loans

Cons: After an initial period, rates fluctuate over the life of the loan; when the interest rates rise, so does your loan payment

Federal Housing Administration Loan (FHA)

Pros:Allows buyers who may not qualify for a home loan to get one Low Down Payment

Cons: The size of your loan may be limited

VA Loan

Pros: Guaranteed loans for eligible veterans, active duty personnel and surviving spouses; offers competitive rates, low or no down payments

Cons: The size of your loan may be limited

Balloon Mortgage

Pros: A fixed rate loan with lower payments for a fixed period

Cons: After an initial period, the entire balance of the loan is due immediately; this type of loan may be risky for some borrowers

Interest-only

Pros: Borrower pays only the interest on the loan, in monthly payments, for a fixed term

Cons: After an initial period, the balance of the loan is due; this could result in much higher payments, paying a lump sum, or refinancing

Reverse Mortgage

Pros:Borrower pays only the interest on the loan, in monthly payments, for a fixed term

Cons: Subject to aggressive lending practices and false advertising promises, particularly by lenders that prey on seniors; check to ensure the loan is Federally insured