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The following is information on Mortgage Store's various loan products:

15, 20, 25 30 and 40 Year Fixed

  • Amortized loan with a fixed interest rate for the specified number of years
  • Payments include principle reduction and interest

30 Year Fixed with Interest Only for First 10 Years

  • Fixed interest rate for 30 years
  • First 10 years is an interest only payment
  • Following 20 years is an amortized payment

Example
For a $200,000 loan at a rate of 6%, the monthly payment is $1000 for the first 10 years. Then for the following 20 years the monthly payment is $1432.

Adjustable Rate Mortgages (ARMs)

  • Amortized loan with a fixed interest rate for a given number of years
  • Interest rate adjusts every 1 year or 6 months thereafter
  • Adjusted rate is based on a margin (set by lender) and typically the LIBOR

Example
For a $200,000 loan on a 5/1 ARM at 6% with a 2.25% margin, the monthly payment is $1199 for the first 5 years. The 6th year,the new interest rate is calculated by adding the margin (2.25%) to the current LIBOR (5.3%)
The montly payment for the 6th year is $1477 and will adjust every year thereafter for 25 years.

Interest Only ARMs

  • Interest only loan with a fixed interest rate for a given number of years
  • Interest rate adjusts every year 6 months or year thereafter and payment becomes amortized
  • Adjusted rate is based on a margin (set by lender) and typically the LIBOR

Example
For a $200,000 loan on a 5/1 ARM at 6% with a 2.25% margin, the montly payment is $1000 for the first 5 years.
The 6 th year, the new interest rate is calculated by adding the margin (2.25%) to the current LIBOR (5.3%)
The payment for the 6th year is $1477 and will adjust every year thereafter for 25 years.

Option ARMs (also know as Hybrid ARMs)

  • Flexible loan which allows you 4 payment options each month
  • Deferred interest can occur

Example
For a $200,000 loan at a FULLY INDEXED RATE of 7% and a BASE RATE of 1.5% There are 4 payment options:
 $1000/month interest only
$1330/month (30 Year Fixed)
$1797/month (15 Year Fixed)
$690/month minimum payment with deferred interest

Home Equity Lines of Credit (HELOCs)

  • Typically a 2nd lien or mortgage
  • Revolving line of credit which can be drawn and paid back, then drawn again via checks or credit card
  • Rate is based on the PRIME rate plus or minus a margin which is based on borrower's credit worthiness
  • Interest only payment but can pay principle at any time

Example
For a $50,000 line of credit if $10,000 is drawn at PRIME (8.25%) plus MARGIN (.25%)
The montly interest only payment is $71.

Fixed Rate Second Mortgage

  • A 2nd lien
  • Amortized loan based on 10, 15, 20 or 30 year amortization
  • Can sometimes be a BALLOON note, which is amortized over 30 years but due and payable within 10 or 15 years