dcsimg

Fixed Rates

Posted by  on Apr 16, 2009
 
There are different kinds of fixed rate mortgage products such as: 30 Year Fixed Rate, which is the interest rate is fixed for 30 years and the mortgage is fully amortized (or paid off) in 30 years if the normal payment schedule is followed. The 20 Year Fixed Rate is the interest rate is fixed for 20 years and the mortgage is fully amortized in 20 years if the normal payment schedule is followed. The 15 Year Fixed Rate means that the interest rate is fixed for 15 years and the loan is fully amortized in 15 years if the normal payment schedule is followed. A 10 Year Fixed Rate is where the interest rate is fixed for 10 years and the loan is fully amortized in 10 years if the normal payment schedule is followed.

The fixed rate balloon mortgage products include a 7/23 conforming mortgage the rate is fixed for a period of seven years and then converts to a new fixed rate for the remaining 23 years. Converting to this new rate is permitted only if the prescribed conditions are met and if not, then the loan is due and payable to the lender as a balloon loan. The loan is fully amortized in 30 years if the normal payment schedule is followed. An alternative type is the 5/25 Conforming Mortgage, which is fixed for a period of 5 years and then converts to a new fixed rate for the remaining 25 years. The new rate is typically based on the Fannie Mae net yield index and is added to a pre-determined margin. Note that converting to this new rate is permitted only if the prescribed conditions are met and if not, then the loan is due and payable to the lender as a balloon loan. The loan is fully amortized in 30 years if the normal payment schedule is followed. Another type is the 30/15 (30 due in 15) rate, in which the rate is fixed for a 15 years and the payment is amortized over 30 years to provide for a lower monthly payment. This loan is due and payable as a balloon loan at the end of 15 years.

There are additionally some ARM rates that include 10/1 ARM - the rate is fixed for a period of 10 years after which in the 11th year the loan becomes an adjustable rate. The adjustable is tied to the 1-year treasury index and is added to a pre-determined margin to arrive at your new monthly rate. Ask what the margin, life cap and periodic caps of your ARM will be in the 11th year. The loan is fully amortized in 30 years if the normal payment schedule is followed.

The 7/1 ARM is when the rate is fixed for a period of seven years after which in the 8th year the loan becomes an adjustable rate. The adjustable is tied to the 1-year treasury index and is added to a pre-determined margin (usually between 2.25-3.0%) to arrive at your new monthly rate. Ask what the margin, life cap and periodic caps of your ARM will be in the 8th year. The loan is fully amortized in thirty years if the normal payment schedule is followed. The 5/1 ARM means that the rate is fixed for a period of 5 years after which in the 6th year the loan becomes an adjustable rate. The adjustable is tied to the 1-year treasury index and is added to a pre-determined margin (usually between 2.25-3.0%) to arrive at your new monthly rate. Ask what the margin, life cap and periodic caps of your ARM will be in the 6th year. The loan is fully amortized (or paid off) in 30 years if the normal payment schedule is followed.

Search for Best Mortgage Rates


X

Get Mortgage Rates by Email

  • Compare mortgage rates offline
  • Get updated rates in your inbox
  • Apply for a mortgage from your email
  • We don't spam

Get Your Rates Emailed Now!

Subscribe To Lending Lowdown
Your information will never be shared
Shoprate User Survey