Mortgage Loan Type

Basic Loan Characteristics

Best For Home-buyers who

Fixed Rate (15-30 years)

Principal and interest payments remain the same, month to month for the entire loan term.

  • Are planning to stay in their home for ten years or more.
  • Prefer the financial stability of predictable monthly payments

Adjustable Rate 10/1 year

Principal and interest rates remain fixed for the first ten years of the loan. At the beginning of the eleventh year the interest rate is adjusted. This becomes an annual event resulting in a change in monthly payment amounts every year for the remainder of the loan term.

  • Are planning to stay in their home for ten years or more.
  • Need an initial payment stability but believe they will be able to manage adjustable payments in the future

OR

  • Plan to live in the home for less than ten years, but want the option for the loan to remain in force in the event that those plans change.

30 due in 7” or 7/23 (2 step) loan

Principal and interest rates remain fixed for the first seven years of the loan term. At the beginning of the eighth year, the interest rate is adjusted in line with prevailing market conditions. The new monthly payment is then left in effect for the remainder of the loan term.

  • Are planning to stay in their home for ten years or more
  • Believe they could manage a one time rate adjustment.

OR

  • Plan to live in the home for less than ten years, but want the option for the loan to remain in force in the event that those plans change.

Adjustable Rate 7/1 year

Principal and interest rates remain fixed for the first seven years of the loan term. At the beginning of the eighth year, the interest rate is adjusted in line with prevailing market conditions. This becomes an annual event for the remainder of the loan term, resulting in a monthly payment that changes every 12 months.

  • Are planning to stay in their home for seven years or more
  • Need initial payment stability but believe they could manage future rate adjustments

OR

  • Plan to live in the home for less than seven years, but want the option for the loan to remain in force in the event that those plans change.

7 Year Balloon

Interest and principal are charged at a fixed rate for the first seven years of the loan term. At the beginning of the eighth year the loan becomes due in full. If payoff is not possible homeowner must refinance at the prevailing interest rate.

  • Are planning to stay in their home for seven years or more
  • Are prepared for the refinancing process and the accompanying monthly payment changes.

OR

  • Plan to live in the home for less than seven years
  • Prefer the financial stability of predictable monthly payments

“30 due in 5” or 5/25 (2 Step)

Interest and principal are charged at a fixed rate for the first five years of the loan term. At the beginning of the sixth year the interest rate is adjusted to reflect prevailing market rates. This new monthly payment then remains in effect for the remainder of the life of the loan.

  • Are planning to stay in their home for five years or more
  • Believe they could manage a one time rate adjustment.

OR

  • Plan to live in the home for less than five years, but want the option for the loan to remain in force in the event that those plans change.

5/5 & 5/1 year adjustable rate

Interest and principal are charged at a fixed rate for the first five years of the loan term. At the beginning of the sixth year the interest rate is adjusted to reflect prevailing market rates. In the case of 5/5 loans this is then repeated every 5 years, for 5/1 loans on an annual basis

  • Are planning to stay in their home for five years or more
  • Need initial payment stability but believe they could manage future rate adjustments

OR

  • Plan to live in the home for less than five years, but want the option for the loan to remain in force in the event that those plans change.

5 Year Balloon

Interest and principal are charged at a fixed rate for the first five years of the loan term. At the beginning of the sixth year the loan becomes due in full. If payoff is not possible homeowner must refinance at the prevailing interest rate.

  • Are planning to stay in their home for five years or more
  • Are prepared for the refinancing process and the accompanying monthly payment changes.

OR

  • Plan to live in the home for less than five years
  • Prefer the financial stability of predictable monthly payments

3/3 & 3/1 year adjustable rate

Interest and principal are charged at a fixed rate for the first three years of the loan term. At the beginning of the fourth year the interest rate is adjusted to reflect prevailing market rates. In the case of 3/3 loans this is then repeated every 3 years, for 3/1 loans on an annual basis

  • Are planning to stay in their home for three years or more
  • Need initial payment stability but believe they could manage future rate adjustments

OR

  • Plan to live in the home for less than three years, but want the option for the loan to remain in force in the event that those plans change.

1 year adjustable rate

At the beginning of each year the interest charged is readjusted in line with current prevailing market conditions. This means that the monthly payment will change on an annual basis for the life of the loan.

  • Want to take advantage of the lowest possible initial interest rate
  • Understand and accept the financial risks involved with a changing annual payment
  • Would be unable to qualify for higher interest rate loans.

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