Adjustable Rate Mortgage
Also known as variable mortgage, an ARM has fluctuating interest rates. They are ideal if you wish to take advantage of the exceptionally low interest rates for a given period but you’re also equally confident of your ability to pay off your loan even when the time comes that your loan’s interest rate increases. There are different types of ARMs available today, including but not limited to buy down mortgage, graduated payment mortgage, two-step mortgage, and negatively amortizing loans.
Interest Only Loans
Interest only loans may have fixed or variable interest rates, but they’re unique in the sense that they allow borrowers to pay only the interest for a specified period of time. When the allotted time expires however, the borrower will be given three choices: he can pay off the entire loan in one lump sum, refinance the loan, or proceed with a monthly installment plan which includes interest and part of the loan principal.
These are different from other types of mortgages mainly because of their source. Conventional loans are offered by well-established companies and they therefore adhere strictly to the guidelines set by the Federal National Mortgage Association.
The requirements they set for borrower are similar to what you’d expect to comply with for bank loans: you need to offer evidence of your abilities for providing the down payment for the loan as well as proof of your assets, submit income requirements, and establish your borrower credit.
To choose the right refinance loan, remember to quote the lowest mortgage refinance rates you’ve acquired with the current interest rate you’re paying for your existing loan. Don’t be afraid to ask questions!