Types of Mortgages

Buying your home

Types of Mortgages

Being a Smart Borrower

A Home Buyer's Dictionary

With a Fixed Rate Mortgage the interest rate does not change over the life of the mortgage. "Conventional" mortgage loans are available, as are loans insured through the Federal Housing or Farmers Home Administrations and those guaranteed by the Veterans Administration. All have fixed rates, as do some "assumable" and "owner-financed" loans.

Adjustable Rate Mortgages (ARMS) have a low interest rate for the first year or two, after which it is adjusted regularly relative to a specific "index," with payments going up or down accordingly. The most commonly used indexes are rates on certain treasury notes or the average regional or national cost of money to savings and loan associations. Some lenders use their own cost of funds, over ,which - unlike other indexes - they have some control.

Graduated Payment Mortgages offer fixed interest rates and a 30-year term. Payment amounts start at a low level, then gradually increase over a few years to an amount which will amortize the loan in the 30-year period.

Growing Equity Mortgages offer fixed interest rates and a 30-year term. Monthly payment amounts are at the 30-year rate for a specified period of time, then increase 2-5%, annually.

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