| Appropriate if you: | PROGRAM | Loan Characteristics |
|---|---|---|
|
30 YEAR FIXED RATE MORTGAGE | Interest rate & monthly payment remain the same for 30 years |
either
|
10/1 YEAR ADJUSTABLE RATE MORTGAGE |
|
| 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 | 7/23 (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 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 | 7/1 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 are willing to refinance at prevailing market rates OR plan to move within 7 years like payment stability | 7 YEAR BALLOON 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 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 | 5/25 (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 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 | 5/5 & 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 are willing to refinance at prevailing market rates OR plan to move within 5 years like payment stability | 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 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 | 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) |
| want to take advantage of lowest rate possible are willing to accept yearly payment changes OR cannot qualify at higher rate programs | 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 |
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