ADJUSTABLE RATE MORTGAGES (ARMs)

Adjustable Rate Mortgages (ARM)
Adjustable-rate mortgages (ARMs) offer lower initial interest rates than fixed-rate mortgages. But after the specified period, the rates are tied to the market index. Monthly payments on an ARM can go up or down at each adjustment period, as market conditions change. To protect you in times of extreme rate fluctuation, lenders offer ceilings, or "rate caps", on the amount the interest rate can rise or fall at each adjustment period. The deferred interest is fully tax deductible.
When it comes to ARMs there's a basic rule to remember...the longer you ask the lender to charge you a specific rate, the more expensive the loan. This saves you money early on, and may help you qualify for a more expensive home. These loans are excellent for the buyer who likes payment flexibility.
An adjustable-rate mortgage is a good choice if you:

Plan to stay in your home for only a short time
Want lower initial payments
Have a small income but expect to earn more in the future
Are confident you can handle future rate increases

Some Examples:

6-Month ARM
A 6-month ARM offers an initial interest rate for the first 6 months, and can be adjusted every 6 months thereafter based on the applicable index.

3/6-Month ARM
A 3/6-month ARM's initial rate is effective for 3 years, and can be adjusted every 6 months thereafter based on the applicable index.

1-, 5-, and 7-Year ARMs
These mortgages maintain an initial interest rate for 1, 5, or 7 years, and can be adjusted every year thereafter based on the applicable index.

Hybrid ARM (3/1 ARM, 5/1 ARM, 7/1 ARM)
These increasingly popular ARMS -- also called 3/1, 5/1 or 7/1 -- can offer the best of both worlds: lower interest rates (like ARMs) and a fixed payment for a longer period of time than most adjustable rate loans. For example, a "5/1 loan" has a fixed monthly payment and interest for the first five years and then turns into a traditional adjustable-rate loan, based on then-current rates for the remaining 25 years. It's a good choice for people who expect to move (or refinance) before or shortly after the adjustment occurs.

2/1 Buy Down Mortgage
The 2/1 Buy-Down Mortgage allows a borrower to qualify at below market rates so they can borrow more. The initial starting interest rate increases by 1% at the end of the first year and adjusts again by another 1% at the end of the second year. It then remains at a fixed interest rate for the remainder of the loan term. Borrowers often refinance at the end of the second year to obtain the best long-term rates. However, keeping the loan in place even for three full years or more will keep their average interest rate in line with the original market conditions.

Annual ARM
This loan has a rate that is recalculated once a year.

Monthly ARM
With this loan, the interest rate is recalculated every month. Compared to other options, the rate is usually lower on this ARM because the lender is only committing to a rate for a month at a time, so his vulnerability is significantly reduced.

Negative Amortization (Neg. Am) Loan
This is a deferred-interest loan which is very powerful and offers many options. Basically, the lender allows the borrower to make monthly payments that are less than the accruing interest. Therefore, if the borrower chooses to make the minimum monthly payment, the loan balance will increase by the amount of interest not paid on the loan. The power of this loan lies in the borrower's ability to choose between making the full loan payment, or the minimum payment, or any amount in between. If a borrower's income varies throughout the year (due to commissions, bonuses, etc.), the borrower can make a lower payment during the "lean times", and then make higher payments when funds are readily available.

INTEREST ONLY MORTGAGES

These loans have a 3,5,7,10, and even 30 year interest only periods. The loan allows you to pay interest only without having to pay the principal. Our 90% HELOC interest only for the first 10 year period is a great example. Any payments above the simple interest payment are applied directly into your principal, reducing your loan balance and your next payment. Equity in your home can also be used as a revolving line of credit. We offer this product now for qualified borrowers to 100% financing.

FIXED ARMS

This mortgage is the same as the interest only loans, except that you have to pay the full principal and interest monthly with options. These are again usuallly 3,5,7, and 10 year fixed period of a lower rate and become an adjustable after your fixed period ends.
4.and last but not least are the FIXED 30 AND 15 MORTGAGE. these are very simple and easy to understand, and have been around forever.the interest rate and monthly payment are fixed and stay the same for the entire life of the loan. This loan is for the person who needs the peace of mind to know that his monthly payment will not change.
THERE ARE MANY VARIATIONS OF MORTGAGES THAT I HAVE DESCRIBED. THE DETAILS AND OPTIONS ARE ENDLESS...PLEASE TAKE THE TIME TO CALL ME TO DETERMINE WHAT THE RIGHT OPTION FOR YOU IS.

Thirty-Year Fixed Rate Mortgage
The traditional 30-year fixed-rate mortgage has a constant interest rate and monthly payments that never change. This may be a good choice if you plan to stay in your home for seven years or longer. If you plan to move within seven years, then adjustable-rate loans are usually cheaper. As a rule of thumb, it may be harder to qualify for fixed-rate loans than for adjustable rate loans. When interest rates are low, fixed-rate loans are generally not that much more expensive than adjustable-rate mortgages and may be a better deal in the long run, because you can lock in the rate for the life of your loan.

Fifteen-Year Fixed Rate Mortgage
This loan is fully amortized over a 15-year period and features constant monthly payments. It offers all the advantages of the 30-year loan, plus a lower interest rate -- and you'll own your home twice as fast. The disadvantage is that, with a 15-year loan, you commit to a higher monthly payment. Many borrowers opt for a 30-year fixed-rate loan and voluntarily make larger payments that will pay off their loan in 15 years. This approach is often safer than committing to a higher monthly payment, since the difference in interest rates isn't that great.