Loan Program
| Characteristics
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15-Year and 30-Year Fixed-Rate Mortgages
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1) Interest rate does not change.
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2) Principal and interest (P & I) does not change.
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3) Fixed-rate mortgages fully amortize over a defined period of time and are paid in-full at the end of the loan term.
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4) Different loan terms are available (15- and 30-year terms are most popular).
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Fixed-Rate Balloons
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1) P & I payment and interest rate do not change.
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2) Regular monthly P & I payments are based on 30-year amortization, while the unpaid balance (balloon) is due at the end of a shorter, predetermined term, typically 5, 7 or 10 years.
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3) Interest rate is typically less than fixed-rate loans.
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4) Most borrowers anticipate refinancing or selling prior to the end of the balloon term.
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Interest-Only Mortgages
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1) There are no reductions to the principal amount.
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2) There is no provision for negative amortization.
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3) Payments may increase up to an amortized amount, but the loan balance itself does not increase.
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4) Generally, interest-only payments are limited to the first 5, 10 or 15 years of the loan.
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5) After that, the loan is amortized for the remainder of its term
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Adjustable-Rate Mortgages (ARM’s)
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1) There is potential for the interest rate/ payment to fluctuate.
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2) ARM’s transfer to borrowers a portion of the risk associated with a changing economy.
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3) In exchange for sharing the risk, ARM’s offer borrowers initial interest rates that are substantially lower than fixed-rate mortgages.
4) The lower interest rate may help
borrowers qualify more easily
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