Fixed Rate Mortgage
The interest rate stays the same throughout the term of the loan - usually 15 or 30 years - so the
principal interest portion of your payment remains the same. Payments are stable but initial rates
tend to be higher than adjustable rate loans and often cannot be assumed by a subsequent
buyer.
Balloon Mortgage
This is a loan, which must be paid off after a certain period. The advantage they offer is an
interest rate that is lower than a mortgage that is made for 30 years.
Adjustable-Rate Mortgage (ARM)
The interest rate is linked to a financial index, such as a Treasury security or a cost of funds - so
your monthly payments can vary up or down over the life of the loan - usually 25 to 30 years.
Interest rates can change monthly, annually, or every 3 or 5 years. Some ARMs have a cap on
the interest rate increase, to protect the borrower.
- Other terms relating to adjustable-rate mortgages:
- Adjustment period: The length of time between interest rate changes. Example: one year
ARM-interest changes annually.
- Cap: The limit on how much an interest rate or monthly payment can change at each
adjustment or over the life of the loan.
- Conversion clause: A provision in some loans that enables you to change an ARM to a
fixed rate loan, usually after the first adjustment period. This may require additional fees.
- Index: A measure of interest rate changes used to determine changes in the loan's interest
rate over the term of the loan.
- Margin: The number of percentage points a lender adds to the index rate to calculate the
ARM's interest rate at each adjustment.
VA Loan
The VA does not lend money; it guarantees a portion of the loan so that lenders who originate
the loan feel comfortable with their risk. Qualified veterans can obtain loans up to $203,000 with
no down payment. VA-guaranteed loans can be combined with second mortgages and are
assumable upon qualifying by any future buyer.
FHA Loan
FHA does not lend money or make a loan; rather, it insures loans. The down payment can be as
low as 2.25%. Either buyer or seller may pay discount points. FHA charges a 2.25% up front
Mortgage Insurance Premium (or as little as 2% for a first time home buyer) that can be financed
in the mortgage amount or paid in cash (no premium is required for condominiums). The
borrower must also pay an annual Mortgage Insurance Premium or .5%, which is collected
monthly.
Seller Assisted Second Mortgage
The seller of the house lends the buyer enough to make up the difference between the purchase
price and the down payment plus first-mortgage balance (a commercial lender may also make
this kind of loan). The terms including the interest rate are based on buyer/seller agreement. It is
often a short-term (5 to 15 year) loan; sometimes "interest only" payments until the term date
when the balance is due in full. A buyer can then refinance the home.
Assumable Mortgage
Buyer "takes over" or assumes the mortgage obligation of the seller (with concurrence of the
lender). The interest rate doesn't change and is sometimes lower than current rates. Often the
loan fees are less as well.
Laverne Toivonen, Realtor / Owner
RE/MAX First Coast of Georgia Realty
4491 Highway 40 E, Suite A
St. Marys, GA 31558
Each Office Independently Owned and Operated
Office: 912-576-9339
Cell: 912-552-5131
Fax: 912-576-9335
Toll Free: 800-576-6779
Home Office: 912-882-6403
E-Mail: MrsT@SEGeorgiaHomes.com