Home Loan Programs
Fixed Rate Mortgage-
A mortgage loan in which
the rate does not change
during the entire period
of the loan. There are
currently 10, 15, 20,
30, 40, 45, and 50 year
periods available. This
loan offers the borrower
security that the
payment will remain the
same; however it is
usually a higher rate
for this reason.
Adjustable Rate
Mortgage- The interest
rate on this loan will
be fixed for a set
period of time, usually
2, 3, 5, 7, or 10 years.
After this period has
ended the rate will
increase or decrease
based on the index in
which the loan was
originally made. The
start rate on an
adjustable rate mortgage
is normally lower than
the fixed rate mortgage.
Interest Only Mortgage-
Monthly payments are
made based on the
interest portion of the
loan. None of the
payment made is applied
to the principle
balance; therefore the
loan balance remains the
same during the interest
only period.
Substantially lower
payments allow the
borrower to afford a
more expensive home, or
save money on the
overall mortgage
payment.
Option Arm Mortgage-
This loan allows the
borrower to choose
between 3-4 different
payment options each
month. Paying the
minimum payment will
defer the remaining
interest portion of the
payment, but it will be
added to the balance of
the loan. Usually used
by savvy investors to
maximize cash flow, this
loan needs to be
understood completely
before obtaining.
The 4 options are as
follows:
- Minimum Monthly
Payment- this is a
less than interest
payment based on a
low rate of 1% -
2.5%. This is
considered a
deferred interest
loan. The payment
amount that is less
than the interest
portion is added to
the balance of the
loan.
- Interest only-
Payments are based
solely on the
interest portion of
the loan, no
principal reduction
is made.
- 30 year- payment
based on a 30 year
amortized loan.
- 15 year- payment
based on a 15 year
amortized loan.
HELOC- Abbreviation
for Home Equity Line
of Credit. This loan
is comparable to a
credit card secured
by your home. The
loan limit is set,
and money can be
drawn against the
account. The
payments are made
based on the current
amount of the loan
used not the limit.
The rate is usually
based on a monthly
adjusting index. |
