Fixed Rate
Mortgages
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)
Adjustable Rate 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
To understand an ARM, you must have a working knowledge of its components.
Commonly Used Indexes for
ARMs
This is a list of the most commonly used indexes by ARM lenders.
Balloon
Mortgages
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
Mortgages
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
Graduated Payment 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.