What types of mortgages are available and what are the pros and cons of each?
30-Year Fixed: A long term loan in which principal and interest are amortized over 30 years; both interest rate and amount of monthly payment remain unchanged for the life of loan. PROS: Considerable tax benefits, especially in early years. Payment never rises, regardless of inflation. CONS: Slow equity build-up. COMMENTS: The most common mortgage in the U.S. and a particularly good investment when interest rates are low. 15-Year Fixed: Same as 30-Year Fixed (see above) except that payback period is 15 years. PROS: Usually lower interest rate than 30-Year. Faster equity build-up. Less interest paid out over life of loan. CONS: Higher monthly payments. Less tax deductible interest. COMMENTS: An excellent option for middle-aged and older buyers. ARM (Adjustable Rate Mortgage): A mortgage whose rate changes over time according to terms specified by the lender, usually according to a specific index or margin. PROS: Low initial interest rate, sometimes below market. Payments may decrease ov
