Amortization is a fancy word that basically describes the number of years it will
take to repay the loan completely, with interest.
10,15, 20, 25 and 30 year fixed
A fixed rate mortgage is a mortgage loan where the interest rate on the note remains
the same through the term of the loan, as opposed to loans where the interest rate
The payment amount is independent of the additional costs on a home sometimes handled
in escrow, such as property taxes and property insurance.
- Monthly payments are fixed over the life of the loan.
- Interest rate does not change.
- Protected if rates go up.
- Can refinance if rates go down.
3/1 ARM, 5/1 ARM, 7/1 ARM, 10/1 ARM, 1 year ARM, 6 month ARM, 1 month ARM
An adjustable rate mortgage (ARM) is a mortgage loan where the interest rate on
the note is periodically adjusted based on a variety of indexes. Among the most
common indexes are the rates on 1-year constant-maturity Treasury (CMT) securities,
and the London Interbank Offered Rate (LIBOR).
Consequently, payments made by the borrower may change over time with the changing
interest rate (alternatively, the term of the loan may change). The borrower benefits
if the interest rate falls and loses out if interest rates rise.
- Lower initial monthly payment.
- Lower payment over a shorter period of time.
- Rates and payments may go down if rates improve.
- May qualify for higher loan amounts.