| Program |
Loan characteristics |
Appropriate for
borrowers who: |
Fixed rate
mortgage
(30,20,15,10 years)
|
- Interest rate &
monthly payment
remain the same for the entire term of the loan
|
- plan to live in property more than 10 years
- like total payment stability
|
10/1 year
adjustable rate
mortgage |
- Interest rate &
monthly payment remain
the same for 10 years
Starting the 11th year, interest rate adjusted every year, so payment is subject to change every year for remainder of loan
|
- plan to live in property more than 10 years
- like initial payment stability, can accept later changes
OR
- plan to move within 10 years
- want loan to remain in force in case plans change
|
7/23 (2-Step)
or
'30 due in 7'
mortgage |
- Interest rate & monthly payment remain the same for 7 years
Conversion option: On the 8th year, interest rate adjusted to reflect prevailing interest rates, resulting payment will remain the same for remainder of loan
|
- plan to live in property more than 10 years
- can tolerate one payment adjustment
OR
- plan to move within 7 years
- want to remain in force in case plans change
|
7/1 year
adjustable rate
mortgage |
- Interest rate & monthly payment remain the same for 7 years
Starting the 8th year, interest rate adjusted every year, so payment is subject to change every year for remainder of the loan
|
- plan to live in property more than 7 years
- like initial payment stability, can accept later changes
OR
- plan to move within 7 years
- want loan to remain in force in case plans change
|
7 year
ballon
mortgage
|
- Interest rate & monthly payment remain the same for 7 years
- At the end of 7 years, loan is due in full. Borrower must refinance into new loan at prevailing interest rates
|
- plan to live in property more than 7 years
- are willing to refinance at prevailing market rates
OR
- plan to move within 7 years
- like payment stability
|
5/25 (2-Step)
or
'30 due in 5'
mortgage |
- Interest rate & monthly payment remain the same for 5 years
Conversion option: On the 6th year, interest rate adjusted to reflect prevailing interest rates, resulting payment will remain the same for remainder of loan
|
- plan to live in property more than 5 years
- can tolerate one payment adjustment
OR
- plan to move within 5 years
- want loan to remain in force in case of plans change
|
5/5 & 5/1 year
adjustable rate
mortgages |
- Interest rate & monthly payment remain the same for 5 years
Starting the 6th year, interest rate adjusted every 5 years (for 5/5 ARM) and every year (for 5/1 ARM)
|
- plan to live in property more than 5 years
- like initial payment stability, can accept later changes
OR
- plan to move within 5 years
- want loan to remain in force in case plans change
|
5 year
balloon
mortgage |
- Interest rate & monthly payment remain the same for 5 years
At the end of 5 years, loan is due in full. Borrower must refinance into new loan at prevailing interest rates
|
- plan to live in property more than 5 years
- are willing to refinance at prevailing market rates
OR
- plan to move within 5 years
- like payment stability
|
3/3 & 3/1 year
adjustable rate
mortgages |
- Interest rate & monthly payment remain the same for 3 years
Starting 4th year, interest rate adjusted every 3 years (for 3/3 ARM) and every year (for 3/1 ARM)
|
- plan to live in property more than 3 years
- like initial payment stability, can accept later changes
OR
- plan to move within 3 years
- want loan to remain in force in case plans change
|
1 year
adjustable rate
mortgages
|
- Interest rate adjusted every year, so monthly payment is subject to change every year for entire 30 year loan term
|
- want to take advantage of lowest rate possible
- are willing to accept yearly payment changes
OR
- cannot qualify at higher rate programs
|
