The traditional fixed
rate mortgage is the most common type of loan
programs, where monthly principal and interest
payments never change during the life of the loan.
Adjustable Rate Mortgages (ARM)
Mortgages (ARM)'s are loans whose
interest rate can vary during the loan's term. These
loans usually have a fixed interest rate for an
initial period of time and then can adjust based on
current market conditions.
Hybrid ARMs (3/1 ARM, 5/1 ARM, 7/1 ARM, 10/1 ARM)
Hybrid ARM mortgages,
also called fixed-period ARMs, combine features of
both fixed-rate and adjustable-rate mortgages.
Interest Only Mortgages
A mortgage is called
“interest only” when its monthly payment does not
include the repayment of principal for a certain
period of time.
Components of an ARM
Adjustable rate loan
payments will adjust during the term of the loan.
These adjustments are calculated using an index and
margin. The amount of the adjustment is limited by
period and lifetime caps that are specified in the
Commonly Used Indexes for ARMs
The most commonly used
indexes for ARMs include: LIBOR, Cost of Funds, MTA,
One-Year Treasury, and Prime.
Balloon mortgages have
a note rate that is fixed for an initial period of
time, and then the remaining principal balance is
due at the end of the term.
Reverse Mortgage is a
type of home equity loan that allows you to convert
some of the equity in your home into cash while you
retain home ownership.
Graduated Payment Mortgages
Mortgage is a loan where the payment graduates
(increases) annually for a predetermined period
(e.g. five or ten years), and then becomes fixed for
the duration of the loan.
ARM / Pick-A-Payment
This loan program is
an adjustable rate mortgage with added flexibility
of making one of several possible payments on your
mortgage every month, in order to better manage your
monthly cash flow.