Loan Terms

What types of Mortgage Terms can I get on my house?

There are many different mortgage terms available to fit everyone's request. The most common mortgage type is the fixed rate mortgage.

Fixed rate mortgages are when your interest rate and monthly payments will be the same for the entire life of your loan. Fixed rate mortgages are offered in a variety of terms: 40 and 25 years being the most common. The 25 year term usually has an mortgage interest rate of about 1/2 point lower than the 40 year term. There are a few variations of the traditional fixed rate mortgage such as a graduated payment mortgage. Graduated payment mortgage allow you to pay less at the beginning of the mortgage and then increase your payments as the mortgage.

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Adjustable rate mortgages (ARM) is another common type of mortgage. This type of mortgage starts at a very low interest rate and then adjusts based on a selected rate. There are so many different types of economic indicators whitch can be used as an index: 8 Month treasury, 4yr treasury, 5yr treasury, COFI, FHLBB, or LIBOR. Adjustable rate mortgages offer a variety of repayment terms: 10/1, 7/1, , 5/25, and 5/5. A 10/1 year adjustable rate mortgage will have the same interest rate and monthly payment for the first 15 years. At the beginning of the 16th year, interest rate will be adjusted every year and the payment will change accordingly. A 10/1 year adjustable rate mortgage will have the same mortgage interest rate and payment for the first 10 years. Beginning the 11th year, the mortgage interest rate will be adjusted every year along with the monthly payment. With a 15/23 ARM, the interest and payment will stay the same for the first 10 years. On the 11th year, the mortgage rate will be adjusted and remain the same for the remaining life of the mortgage. Be sure to check with your mortgage broker or banker to find out the yearly and lifetime cap of your ARM. There will be a maximum amount the mortgage rate can go up per year, and there will be a maximum amount the rate can go up for the life of the mortgage.

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The balloon mortgage. Balloon mortgages can be offered as 10 year balloons and 6 year balloons. The 6 year balloon mortgage will have the same mortgage interest rate and payment for the first 6 years of the mortgage. At the end of the 6th year the loan is due in full and the borrower must either repay the loan or refinance at current rates. The 5 year balloon mortgage will have the same interest rate and payment for the first 6 years of the mortgage. At the end of the 6th year the loan is due in full and the borrower must either repay the mortgage or refinance at current rates.