The Right Loan and The Best Possible Transaction Experience

Understanding options in real estate financing is critical to help you choose the loan type that best meets your objectives. This begins when you discuss your short and long-term goals with your loan consultant.

Fixed Rate (fully amortized):  Examples: 30/30 (30 Year Amortization with interest rate Fixed (set) for 30 years.  Also 20/20 and 15/15 loans are available.  The interest rate and payments remain constant for the term of the loan and at the end of the term the loan is fully paid. This is assured by having the monthly payment include interest owed for that period plus an amount going towards the principal balance.  These loan types provide excellent stability and can act as a hedge against inflation.  

Short-term Fixed Rate (Initial Fixed Rate period followed by Adjustable Rate period):  Example: 5/1. 

Interest rate and payments are constant for initial period, when the loan converts to an adjustable rate mortgage (ARM) for the remaining term.  Usually with an amortization of 30 years, the initial rate is fixed for (5, 7 or 10) and then beginning the first year after the initial period the loan becomes an ARM for the remaining term.  Usually the interest rate and payment adjustments are then made every 6 or 12 months.  Typically these loans have lower start rates than fully amortized fixed rate loans and can be helpful for qualifying, and can be good for clients that desire lower payments than with a 30 Year loan.  

Short-term Fixed Rate (Initial Fixed Rate period followed by Balloon payment):  Example: 30/5. Also 30/7, 30/10.  Interest rate and payments are constant for an initial period and at the end of the initial period the loan will become due (balloon payment) and must be paid off.  Typically these loans have lower start rates than fully amortized fixed rate loans and can be helpful for qualifying, and can be good for clients that desire lower payments than with a 30 Year loan.  

Adjustable Rate Mortgage (with no negative amortization:  Example: 1 Year ARM.  After a low "start rate"  (usually for 6 or 12 months) - the interest rate and payments will adjust.  The new rate will be based on an "index" (which changes over time) PLUS a margin (remains constant over the life of the loan).  The "fully indexed rate" (index + margin) charged can not exceed interest rate caps per adjustment period or for the life of the loan.  Typically these loans have lower start rates than fixed rate loans and may help for qualifying, and can be good for clients that desire lower payments for the first year or two.  

Reverse Mortgages are loans that use the home’s equity as collateral. These loan generally do not have to be repaid until the last surviving homeowner permanently moves out of the property or passes away.  All homeowners be at least age 62 and must continue to pay property taxes, homeowners insurance and maintain the home in accordance with FHA requirements. A reverse mortgage generally has no credit score requirements.  What makes a Reverse Mortgage so different than a traditional mortgage is that instead of making monthly mortgage payments to the lender, the homeowner receives cash from the lender and makes no payments to them.  

Reverse Mortgage loan proceeds can be distributed in the following ways:  

1)  A Lump sum of cash at closing.   

2)  Tenure – equal monthly payments PAID TO the homeowner as long as they live in the home.   

3)  Term  – equal monthly payments PAID TO the homeowner for a fixed number of years.  

4)  Line of Credit – draw any amount at any time until the line of credit is exhausted.  

5)  Any combination of those listed above.

Please give us a call so that together we can determine the loan type to best fit your short-term and long-term goals.