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Which mortgage is right for me?

When you are ready to buy a home, you want to get the best mortgage possible for your needs. Here are the most common types of home loans and the major pros and cons of each.

30-Year Fixed Mortgage

Pros: 30-year fixed mortgages offer affordable monthly payments that won’t change over the life of the loan. They can normally be obtained with a small down payment.
Cons: The length of the loan is the big drawback of a 30-year fixed mortgage. This means that interest accrues over a long period of time and can mean thousands of extra dollars paid over the life of the loan. The interest rate could also be higher on these longer loans than on those with 15-year terms.

15-Year Fixed Mortgage

Pros: The shorter term of the loan means that less interest is paid and the loan will be paid off in half the time of a 30-year fixed mortgage. As is the case with the 30-year-mortgage, the interest rate is fixed over the life of the loan and can be lower than those on longer loans.
Cons: Not everyone can qualify for a 15-year loan and many cannot afford the larger payments that come with the shorter term.

Adjustable Rate Mortgage

Pros: Adjustable rate mortgages (ARMs) feature interest rates that are favorable at the time they are obtained, but that will fluctuate with the market. If the market stays favorable, you can save some money on interest. If the interest rate drops during your loan period, you will benefit from the cost savings. You also have the option to convert your ARM into a fixed loan by refinancing should the market take a turn for the worse.
Cons: Those who get ARMs are taking a chance; the interest rate may increase while they have the loan. If it does, they will be subject to larger payments they may not be able to pay. ARMs may also tend to have pre-payment penalties that may not exist with fixed-rate mortgages.

For more financial tips, visit your local credit union. HealthNet Federal Credit Union has proudly served Baptist Memorial Health Care employees and the health care community throughout the Mid-South for more than 60 years. For information about the credit union, please call 901-226-1111 or visit www.healthnetfcu.org.

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