Serving Northern Utah

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Mortgages at a glance

With all the types of funding available, choosing a mortgage that is right for you can be a bit confusing.  Below is a brief synopsis and the pros and cons of today's most popular mortgage loans.

 

30-Year Fixed

Definition	Advantages	Drawbacks
As above, but payback period is 30 years.	-Considerable tax benefits, especially in early years.	-Slow equity buildup.

 

Adjustable Rate Mortgage (ARM)

Definition	Advantages	Drawbacks
A mortgage whose rate changes over time according to terms specified by the lender, usually according to short-term Treasury Bill rates.	-Low initial interst rate, sometimes below market. -Payments may decrease over time.	-Payments may increase over time. -Risky if rates rise significantly.

 

FHA/VA Mortgage Loans

Definition	Advantages	Drawbacks
Government-insured or guaranteed mortgages that can make purchase more affordable than conventional loans.	-Little or no down payment required. -Marginally better rate than conventional 30-year mortgages.	-Lower limits on the maximum that can be borrowed. -VA required current/past military service.

 

Graduated Payment Mortgage (GPM)

Definition	Advantages	Drawbacks
A fixed rate mortgage offering low initial monthly payments that increase by a predetermined amount, then level off after about 5 years.	-More affordable payments for the first few years. -Unlike ARMs, buyer knows upfront how much payments will rise in future.	-Slower equity build-up. -Buyer's income may not rise in proportion to payments.

 

Shared Appreciation Mortgage (SAM)

Definition	Advantages	Drawbacks
An arrangement in which a third-party investor provides a percentage of the down payment and retains the same percentage of ownership and appreciation until the occupant/buyer buys them out at a later date.	-Less cash required for down payment. -Some tax benefits. -May be easier to qualify for than conventional financing.	-Slower equity build-up. -Buyer indebted to two parties.