Loan Program	Advantages	Disadvantages
Fixed-rate mortgages	Predictable monthly payments Less risk if market conditions cause rates to rise Rate does not change	You pay more in interest Higher interest rate Unable to take advantage of lower interest rates due to favorable market conditions
Adjustable rate mortgages	Flexibility Lower initial monthly payment You pay less for short term ownership Easier to qualify for higher loan amounts	More risk Inability to predict future housing costs Potential higher payments (at max. interest rate)
Balloon mortgages	Low interest rate Shorter term financing Low monthly payments Protection from rate increases	Potential unfavorable refinance terms If you do not refinance, you have to pay balance at end of term Risk foreclosure if you cannot make balloon payment
Stated income mortgages	Don't need to verify income	Higher rates Need a low LTV to qualify
Prepayment penalty mortgage	You get a low rate If interest rates go up, you have a favorable rate	You may be penalized if you refinance, sell or make additional payments If interest rates go down, you have to keep your loan
Combination loans	Avoid PMI Potential tax advantages	Possibly higher monthly payments Two monthly payments instead of one
Interest-only loans	Minimize monthly payments Keep your cash available for investment	Balance of the loan does not decrease over time
Asset-backed loans	Keeps your assets fully vested Minimal up front cash needed No need for mortgage insurance	Risk liquidating your portfolio if you default Can not liquidate your pledged portfolio
Home equity line of credit	Flexible access to funds Potential tax advantages You only draw what you need You only pay interest on what you borrow	Ties up equity making it unavailable for other needs Higher interest rate than a first mortgage
Home equity loan	Predictable fixed payments Possible tax advantages	Ties up equity making it unavailable for other needs Higher interest rate than a first mortgage Cannot pay down and withdraw additional funds