30 Year Fixed Rate Mortgage Loan
A Fixed Rate Mortgage is one in which the rate remains the same across the life of the loan. The advantage is that monthly payments will remain the same. However, if you lock into a higher interest rate, the rate will not change, even if interest rates go down in the future. The lowest monthly payments come from 30-year fixed-rate mortgages. However, these mortgages also take longest to build up equity in your home. Experts recommend a 30-year mortgage if you are planning to stay in your home for several years and want a stable rate.
15 Year Fixed Rate Mortgage Loan
These loans spread the principal and interest across a 15-year period, after which you have paid off your loan. Because of the shorter term of the loan, you can build up equity in your home at a much faster pace. However, monthly payments are higher than for a 30-year fixed-rate mortgage. Experts recommend a 15-year fixed-rate mortgage if you are planning to sell your home in a few years and want a stable rate.
Adjustable Rate Mortgage Loan
Adjustable-Rate Mortgages, or ARMs as they are commonly called, are ones in which the interest rate changes periodically according to a fixed index.
A 1-year ARM adjustable
The interest rate adjusts annually. Monthly payments will increase or decrease along with the index rate, which is specified by the mortgage. Common indices include 1-year Treasury notes, Federal funds rate and the national cost of funds index.
A margin -- usually one or two percentage points -- is added to the index rate. Adjustable-rate mortgages include two caps on the amount the rate can increase or decrease. One cap limits the interest rate adjustment in any one adjustment period (e.g. one year in a one-year ARM), and the second cap limits the interest rate adjustment across the lifetime of the loan.
*The advantage of an adjustable-rate mortgage is that monthly payments can decrease when the index goes down. However, monthly payments will increase when the index goes up.
Assumable Mortgage Loan
A mortgage loan which allows a new home purchaser to undertake the obligation of the loan with no change in loan terms. This is generally true of loans without due-on-sale clauses.
Balloon Mortgage Loan
One way of shortening the length of your mortgage is to purchase a balloon mortgage. It works like an ARM or a fixed-rate mortgage for the first several years. After that period of time has expired, you owe a large payment -- sometimes the remaining balance on the loan. The advantage of this type of loan is that it keeps monthly payments low. Experts recommend this type of loan for people who are planning to sell their homes within a few years, and can pay off the balloon payment from the proceeds of the sale of the house. A convertible loan is an ARM that can be converted to a fixed-rate mortgage after a specified number of years. There may be a cost associated with this.
Construction Mortgage Loan
This type of loan finances subdivision costs and/or improvements to Real Estate. This type of loan usually issues funds in steps, as the construction progresses.
Contract for Deed Mortgage Loan
This type of debt instrument is usually taken by the seller as part of the purchase price of the property. Such type of financing is used as an inducement to a sale when normal third-party financing is expensive or unavailable and in situations where the existing debt and sales price exceeds the cash resources of the buyer. A contract for deed can be a senior or junior mortgage.
VA Contract for Deed Mortgage Loan
The VA gives purchasers of it's acquired properties a 30 year-below market-contract for deed!
Fixed Payment Mortgage Loan
This type of debt instrument is secured by real property which feature a periodic payment of interest and principle which is constraint over the term of the loan.
Fixed-Rate Mortgage Loan
A loan secured by real property featuring an interest rate that is constant for the term of the loan.
Floor Loan Mortgage Loan
The minimum that a lender is willing to advance.
Fully Amortized Mortgage Loan
A loan having payments of interest and principle that are sufficient to liquidate the loan over its term.
Gap Mortgage Loan
A loan that fills the difference between the floor loan and the full amount of the permanent mortgage.
Graduated Payment Mortgage Loan
A mortgage requiring lower payments in early years than in later years.
Home Equity Mortgage Loan
A loan secured by a second mortgage on one's personal residence, generally to be used for some non-housing expenditure.
Indexed Mortgage Loan
A long term loan in which the term, payment, interest rate, or principle amount may be adjusted periodically according to a specific index.
Interest only Mortgage Loan
A loan in which interest is payable at regular intervals until loan maturity, when the full loan balance is due.
Junior Mortgage Loan
A mortgage whose claim against the property will be satisfied only after prior mortgages have been repaid.
Leasehold Mortgage Loan
A lien on the tenant's interest in real estate.
Level Payment Mortgage Loan
Requires the same payment each month (or other period) for full amortization.
Master Mortgage Loan
The mortgage debt existing on a building used for cooperative housing. While each co-op tenant shareholder is obligated for a portion of the loan, this debt is separate from the loans used to purchase the individual co-op shares.
Open End Mortgage Loan
A mortgage under which the mortgagor (borrower) may secure additional funds from the mortgagee (lender), usually stipulating a ceiling amount that can be borrowed.
Package Mortgage Loan
A mortgage arrangement, whereby the principle amount loaned is increased because personally (e.g., appliances) as well as realty serve as collateral.
Partially Amortized Mortgage Loan
A mortgage under which requires some payments toward principle but does not fully retire the debt, thereby requiring a balloon payment.
Pledged Account Mortgage Loan (PAM)
A type of home purchase loan under which a sum of cash contributed by the owner is set aside in an account pledged to the lender. The account is drawn down during the initial years of the loan to supplement periodic mortgage payments. The effect is to reduce the payment amounts in the early years.
Price-Level-Adjusted Mortgage Loan
A loan whose payment is adjusted according to the rate of inflation. The payments are generally quite low, typically 3 to 5% annually of the debt. This type of mortgage is not common in the United States.
Purchase Money Mortgage Loan
This mortgage is given by a grantee (buyer) to a grantor (seller) in part payment of the purchase price of the property. A purchase money mortgage can be a first mortgage or a junior lien depending on its priority.
Piggyback Mortgage Loan
This type of loan is a combination of the construction loan with the permanent loan commitment. An example would be the lender issues a commitment at a flat 15% rate, effective upon construction completion. As assurance that the loan will be borrowed even if rates are lower later, the commitment is piggybacked to the construction loan, and must be drawn down upon retiring the construction loan.
Reverse Mortgage Loan
A type of mortgage Loan, which allows a house rich and cash poor homeowner, to draw against the homes equity and delay repaying the loan balance for an extended period of time. Most lenders require that the borrower be at least 62 years of age for this type of loan.
Rollover Mortgage Loan
A type of mortgage Loan, commonly used in Canada, in which the amortization of principle is based on a long term but the interest rate is established for a much shorter term. The loan may be extended, or rolled over, at the end of the shorter term at the current market interest rate.
Second Mortgage Loan
A subordinated lien, created by a mortgage loan, over the amount of a first mortgage. Second mortgages are commonly used to reduce the amount of a cash down payment on a purchase or to raise cash for any purpose.
Shared Appreciation Mortgage Loan
A residential loan with a fixed interest rate set below market rates, with the lender entitled to a specific share of appreciation in property value over a specific time period. Loan payments are set to amortize over a long-term maturity, but repayment is generally required after a much shorter term. The appreciation is set by the home sale or by appraisal if no sale is made.
Shared Equity Mortgage Loan
A home loan in which the lender is granted a share of the equity, thereby allowing the lender to participate in the proceeds of the resale. This type of loan usually requires the lender to provide a portion of the down payment.
VA Mortgage Loan
This type of loan is guaranteed by the US Veterans Administration under the Servicemen's Readjustment Act of 1944 and later. The VA guarantees restitution to the lender in the event of default. The guarantee is 60% of the loan. The home must be a principle residence and generally requires little or no out-of-pocket expenses for the veteran.
Wraparound Mortgage Loan
A loan arrangement in which an existing loan is retained and an additional loan, larger than the existing loan, is made. The new lender accepts the obligation to make payments on the old loan. Sellers are the most common wraparound lenders. |
