A 30-year (360 months) fully amortized mortgage product. The 30 year fixed rate mortgage is perhaps the most popular mortgage product amongst homeowners. It gives them a sense of stability and knowledge that their payments will not change even if the interest rates continue going up. This type of mortgage is best suited for the homeowners who managed to lock in a very low fixed rate and are planning to keep the house for over 7 years.
A 15-year (180 months) fully amortized mortgage, while requiring higher monthly payments than the 30-year fixed, generates significant savings in interest payments over life of the loan through accelerated principal reduction. This type of product is suitable for the clients who can afford to make higher payments on the mortgage. Remember, that you can achieve the same level of savings if you get a 30-year fixed mortgage, but make extra payments every month towards the principle.
This is a 30 year fixed rate mortgage product with a lender-subsidized temporary buy-down of the Note Rate and can be a 3-2-1 or 2-1 buy-down. For example, In 3-2-1 buy-down situation, the resulting Initial Rate is 3% below the Note Rate for the first six (6) months, the rate then increases by 1% for the next six months (7 -12), and then again by 1% for months 13 -18. A final increase of 1% occurs beginning with the 19th month to bring the rate of interest to the Note Rate where it remains constant and fully amortizing for the remainder of the 30-year term. This mortgage product offers good solution to the borrowers that expect their income to increase over the next two years and are looking for a low start rate.
This is a fixed rate mortgage product, the payments for which are amortized over 30 years, with an initial term of seven (7) years. At the end of the initial 7-year term, the homeowner may elect to take advantage of the conditional reset option, subject to all specific terms of the lender, pay off the entire remaining principle (balloon payment) or refinance the property. The reset option normally resets the fixed rate to the FHA 30-year fixed rate prevailing at the time of reset plus half percentage point. The reset mortgage is subsequently re-amortized so that the fixed monthly payments for the remaining 23 years of the mortgage result in payment of the loan in full in the remaining 23 years. This product is best suited for customers who are not planning to stay in the house longer than 7 years (which is vast majority of homeowners), or who estimate that within this 7-year period interest rates will go down and they will be able to refinance the loan to a lower interest rate program.
This is an adjustable rate mortgage (ARM) fully amortized over 30 years. The index associated with this mortgage product is the 1 Year T -Bill index. This loan normally features an annual interest rate cap and a lifetime interest rate cap, i.e. the maximum percentage the rate on the loan can increase respectively in one year or over the life of the loan. Annual payment changes are calculated by adding a pre-determined margin to the then current index rounded to the nearest .125%. For example, if the margin for this loan product is set at 2.75% and the T-bill index is at 5.5%, your interest rate on the loan would be 8.25%. If you expect the interest rates to go down, this is a very smart option to have especially now, when the rates are getting to decade high.
These are variations of practically the same type of hybrid programs. This is an adjustable rate mortgage (ARM) fully amortized over 30 years, with 1-year T-Bill index associated with it. However, an Initial Rate of the loan is fixed respectively for three, five, seven or 10 years. After the Initial Rate period, this mortgage product converts to 1 Year T-Bill ARM and features the same factors as the ARM loan above. These programs offer flexibility and great savings to people who expect to stay in their home for a relatively short period of time. Quite often 3/1 and 5/1 ARM programs can offer the Initial Rate 0.5 to 0.75% lower than a 30-year fixed mortgage with the same loan costs.
A 30 year (360 months) fully amortized level payment. This product features financing with minimal down payment requirements. This product is assumable to a qualified borrower and there is no pre-payment penalty associated with this mortgage product.
A 15 year (180 months) fully amortized mortgage, while requiring higher monthly payments than the 30 year fixed, generates significant savings through accelerated principal reduction. This product features financing with minimal down payment requirements. This product is assumable to a qualified borrower and there is no pre-payment penalty associated with this mortgage product.
Some lenders will impose a pre-payment penalty on the loan, especially the loans with an Initial Rate below the market. There is a public stigma attached to the words "pre-payment penalty", while the majority of borrowers do not understand how it works. The truth is that the pre-payment penalty is part of all loans that are not done through FHA or VA. You can buy-out the pre-payment penalty with most lenders. However, the pre-payment penalty is normally charged only if you pay more than 20% of the loan principle in one year and normally is imposed for no more than three years. Since 99% of borrowers do not intend to pay more than 20% of the loan principle in any given year especially in the first three years of the loan, why to increase the cost of your loan by buying out this standard feature?
A loan secured with equity in the borrower’s home. These type of loans feature higher interest rates, anywhere from 9% and up, depending on the lender, borrower's credit, term of the loan and other factors. Very often the borrowers take their equity out of the house to pay off some consumer debts or to do remodeling in the house. If you take equity to make payments on your first mortgage or to play in a stock market, these are sure signs of trouble, call me immediately! Even though you still can find lenders that will do 125% loans against your house, I advise my clients NEVER to take this type of financing: it is always smart to have some equity left in the house and not to overextend yourself with home equity loans.
Transfer of the title from the Trustee (a neutral third party, normally the title company) to the Trustor (borrower) after the loan to the Beneficiary (lender) is paid in full. The reconveyance must be recorded in the Recorder’s office to be valid.
Some loans have an assumption clause that allows the new buyer of the property to take over the existing loan and become liable for the repayment of the loan. In some situations the seller or the original borrower will remain secondary or primary liable for the repayment of the loan. Contact a qualified real estate professional for any clarifications regarding this issue.
The same as an Adjustable Interest Rate above.
All this information may seem overwhelming at first. However, take time to study your options, it will help you in the long-run to save money, YOUR money!
Alex Lisnevsky
Mercury Capital Group Inc.
(760) 757-5070