| Cynthia DaSilva |
| (602) 930-3141 |
TYPES OF LOANS
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payment can change over the life of the loan. This is because the interest rate for an ARM is tied
to an index (such as Treasury Securities) that may rise or fall over time. In order to protect
against dramatic increases in the rate, ARM loans usually have caps that limit the rate from
rising above a certain amount between adjustments (i.e. no more than 2 percent a year), as well
as a ceiling on how much the rate can go up during the life of the loan (i.e. no more than 6
percent). With these protections and low introductory rates, ARM loans have become the most
widely accepted alternative to fixed-rate mortgages.
• Hybrid loans
Hybrid loans combine features of both fixed-rate and adjustable-rate mortgages. Typically, a
hybrid loan may start with a fixed-rate for a certain length of time, and then later convert to an
adjustable-rate mortgage. However, be sure to check with your lender and find out how much
the rate may increase after the conversion, as some hybrid loans do not have interest rate caps
for the first adjustment period.
Other hybrid loans may start with a fixed interest rate for several years, and then later change to
another (usually higher) fixed interest rate for the remainder of the loan term. Lenders
frequently charge a lower introductory interest rate for hybrid loans vs. a traditional fixed-rate
mortgage, which makes hybrid loans attractive to homeowners who desire the stability of a
fixed-rate, but only plan to stay in their properties for a short time.
• Balloon payments
A balloon payment refers to a loan that has a large, final payment due at the end of the loan. For
example, there are currently fixed-rate loans which allow homeowners to make payments
based on a 30-year loan, even thought the entire balance of the loan may be due (the balloon
payment) after 7 years. As with some hybrid loans, balloon loans may be attractive to
homeowners who do not plan to stay in their house more than a short period of time.
Time as a factor in your loan choice
As has been discussed, the length of time you plan to own a property may have a strong
influence on the type of loan you choose. For example, if you plan to stay in a home for 10 years
or longer, a traditional fixed-rate mortgage may be your best bet. But if you plan on owning a
home for a very short period (5 years or less), then the low introductory rate of an adjustable-
rate mortgage may make the most financial sense. In general, ARMs have the lowest
introductory interest rates, followed by hybrid loans, and then traditional fixed-rate mortgages.
More Info
to an index (such as Treasury Securities) that may rise or fall over time. In order to protect
against dramatic increases in the rate, ARM loans usually have caps that limit the rate from
rising above a certain amount between adjustments (i.e. no more than 2 percent a year), as well
as a ceiling on how much the rate can go up during the life of the loan (i.e. no more than 6
percent). With these protections and low introductory rates, ARM loans have become the most
widely accepted alternative to fixed-rate mortgages.
• Hybrid loans
Hybrid loans combine features of both fixed-rate and adjustable-rate mortgages. Typically, a
hybrid loan may start with a fixed-rate for a certain length of time, and then later convert to an
adjustable-rate mortgage. However, be sure to check with your lender and find out how much
the rate may increase after the conversion, as some hybrid loans do not have interest rate caps
for the first adjustment period.
Other hybrid loans may start with a fixed interest rate for several years, and then later change to
another (usually higher) fixed interest rate for the remainder of the loan term. Lenders
frequently charge a lower introductory interest rate for hybrid loans vs. a traditional fixed-rate
mortgage, which makes hybrid loans attractive to homeowners who desire the stability of a
fixed-rate, but only plan to stay in their properties for a short time.
• Balloon payments
A balloon payment refers to a loan that has a large, final payment due at the end of the loan. For
example, there are currently fixed-rate loans which allow homeowners to make payments
based on a 30-year loan, even thought the entire balance of the loan may be due (the balloon
payment) after 7 years. As with some hybrid loans, balloon loans may be attractive to
homeowners who do not plan to stay in their house more than a short period of time.
Time as a factor in your loan choice
As has been discussed, the length of time you plan to own a property may have a strong
influence on the type of loan you choose. For example, if you plan to stay in a home for 10 years
or longer, a traditional fixed-rate mortgage may be your best bet. But if you plan on owning a
home for a very short period (5 years or less), then the low introductory rate of an adjustable-
rate mortgage may make the most financial sense. In general, ARMs have the lowest
introductory interest rates, followed by hybrid loans, and then traditional fixed-rate mortgages.
More Info
| Cynthia DaSilva 602-930-3141 |
| AXIOM RESIDENTIAL PROPERTIES |