1. Buying a House

2. Pros It’s secured by the property. The maximum loan term is 25 to 30 years. The flexibility comes at a cost, which is an estimated 1% interest rate above a closed mortgage. Cons Towards the end, you’ll pay more and more of the principal. The closed mortgage permits some amount of prepayment, around 10% to 20% of the original principal loaned a year. The maximum loan term is 25 to 30 years. An open mortgage is a mortgage that permits repayment of the principal amount at any time, without penalty. In an open mortgage repayment terms are more flexible than a closed mortgage, which do not usually allow for prepayment without penalty.

3. Pros You know exactly what you’ll be paying each month for the life of the loan. There’s no stress if rates go up. It is easy to shop around and compare rates. The math involved with your loan is straightforward. It can save you money if you keep your loan long-term and rates go up. Cons FRMs may not be the best option for people looking to sell or refinance soon. You’re stuck with the rate you locked in until you refinance. Falling rates can give you a case of buyer’s remorse. A fixed-rate mortgage (FRM), often referred to as a "vanilla wafer" mortgage loan, is a fully amortizing mortgage loan where the interest rate on the note remains the same through the term of the loan, as opposed to loans where the interest rate may adjust or "float".

4. Pros You can end up saving big money during the initial fixed-rate period on Hybrid ARMs. Over the first five years, you’d have paid off $27,114 in principal. On a $240,000 mortgage with $60,000 down, the total monthly principal and interest payments amount to just $996. Cons If interest rates move higher after the initial rate period, your payments would also increase. If you are not ready for it, this could lead to “payment shock” and in a worst-case scenario, result in default. This is a big risk you take if you plan on living in your home after the initial fixed-rate period ends. An Adjustable Rate Mortgage (ARM) that gives the borrower the option to convert to a fixed-rate mortgage. Convertible ARMs are marketed as a way to avoid rising interest rates and usually include specific conditions.

5. Pros Provides some peace of mind for borrowers concerned about rate rises. Provides more certainty in budgeting than full variable loans. Can make additional payments on variable portion. Cons Allows limited additional payments only. Repayments will rise with rate rises. Mortgage payments under the ARM change when interest rates change. The split mortgage allows you to choose a split, such as 30/70 or 50/50, to define the loan periods during which the interest rate is fixed or adjustable.

6. Pros No repayments required for the rest of your life as long as you or your spouse live in your home. Only pay property taxes and insurance. Tax-Free Funds for as long as you live in the home. The funds you receive are non-taxable. Often there is no specific income or credit score requirement. However there is talk that this may change. Cons You may outlive your equity funds so you will need to spend the funds wisely. Value of estate inheritance may decrease over time as proceeds are spent. This is especially the case if the value of the home goes down. Needs based government programs such as Medicaid may be affected. However, a reverse mortgage loan generally does not affect eligibility for Social Security or Medicare. A reverse mortgage or home equity conversion mortgage (HECM) is a special type of home loan for older homeowners (62 years or older) that requires no monthly mortgage payments. Borrowers are still responsible for property taxes and homeowner's insurance.

7. Pros Reducing your interest rate and lower monthly payments. Shortening or lengthening the repayment time. Taking cash out, which can then be used to spend, invest or pay other debts. Consolidating several mortgages on the property into a single loan. Cons Paying points, fees and closing costs can eat into any savings you'll gain by refinancing. Paying penalties for paying off your existing mortgage. Facing higher interest rates if you move from a fixed-rate mortgage to an adjustable rate mortgage. A refinance occurs when a business or person revises a payment schedule for repaying debt. Mechanically, the old loan is paid off and replaced with a new loan offering different terms. When a company refinances, it typically extends the maturity date. Companies or individuals refinancing loans may have to pay a penalty or fee.