Types of Mortgage Loans for homes in Palos Verdes and South Bay real estate
Fixed-Rate Mortgage
Pros: The interest rate stays the same over the entire term, usually 15 or 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 than 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
Hybrid: Combines features of fixed-rate and adjustable-rate mortgages; typically start with a fixed rate for a certain length of time and then later converts to an adjustable-rate. However, some hybrid loans don’t have interest rate caps for the first adjustment period
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. The loan has a large, final payment due at the end of each loan
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
