Bear Island Land Co., Inc.

~Your Recreational Real Estate Professionals~

Types of Mortgages

 

The following is a list of the most common types of mortgages, their characteristics, and who is most likely to benefit from the particular type of mortgage. Please note that not every type of mortgage is presented, and that these are guidelines; individual buyers need to consult with a financial planner to determine the best type of mortgage for there particular circumstances

Fixed-Rate Mortgage
Usually offered 30,10,15, and 10 year lengths, it has the same interest rate, and the same monthly payment, for the entire term of the loan. This is the best choice for those who plan to live in property more than 10 years like total payment stability.

10/1 Year Adjustable Rate Mortgage
The interest rate and monthly payment remain the same for 10 years, then starting the 11th year, interest rate adjusted every year, so payment is subject to change every year for remainder of loan. This is the best choice for those who plan to live in property more than 10 years, and like initial payment stability but can accept later changes - OR - who plan to move within 10 years and want loan to remain in force in case plans change.

7/1 Year Adjustable Rate Mortgage
The interest rate and monthly payment remain the same for 7 years, then starting the 8th year, interest rate adjusted every year, so payment is subject to change every year for remainder of the loan. This is the best choice for those who plan to live in property more than 7 years, and like initial payment stability but can accept later changes - OR - who plan to move within 7 years and want loan to remain in force in case plans change.

5/5 and 5/1 Year Adjustable Rate Mortgages
The interest rate and monthly payment remain the same for 5 years, then starting the 6th year, the interest rate is adjusted every 5 years (for 5/5 ARM) or every year (for 5/1 ARM). This is the best choice for those who plan to live in property more than 5 years, and like initial payment stability but can accept later changes - OR - who plan to move within 5 years and want loan to remain in force in case plans change.

3/3 and 3/1 Year Adjustable Rate Mortgages
The interest rate and monthly payment remain the same for 3 years, then starting the 4th year, the interest rate is adjusted every 3 years (for 3/3 ARM) and every year (for 3/1 ARM). This is the best choice for those who plan to live in property more than 3 years, and like initial payment stability but can accept later changes - OR - who plan to move within 3 years and want loan to remain in force in case plans change.

5 Year Balloon Mortgage
The interest rate and monthly payment remain the same for 5 years, then at the end of 7 years, the loan is due in full. The borrower must refinance the remaining loan into a new loan at prevailing interest rates. This is the best choice for those who plan to live in property more than 5 years, and are willing to refinance at prevailing market rates - OR - who plan to move within 5 years and like payment stability.

7 Year Balloon Mortgage
The interest rate and monthly payment remain the same for 7 years, then at the end of 7 years, the loan is due in full. The borrower must refinance the remaining loan into a new loan at prevailing interest rates. This is the best choice for those who plan to live in property more than 7 years, and are willing to refinance at prevailing market rates - OR - who plan to move within 7 years and like payment stability.

7/23 (2-Step) or "30 due in 7" Mortgage
The interest rate and monthly payment remain the same for 7 years, then on the 8th year, the interest rate is adjusted to reflect the prevailing interest rates, and the resulting payment will remain the same for remainder of loan. This is the best choice for those who plan to live in property more than 7 years, and like initial payment stability but can accept later changes - OR - who plan to move within 7 years and want loan to remain in force in case plans change.

5/25 (2-Step) or "30 due in 5" Mortgage
The interest rate and monthly payment remain the same for 5 years, then on the 6th year, the interest rate is adjusted to reflect the prevailing interest rates, and the resulting payment will remain the same for remainder of loan. This is the best choice for those who plan to live in property more than 5 years, and can tolerate one payment adjustment - OR - who plan to move within 5 years and want loan to remain in force in case plans change.

1 Year Adjustable Rate Mortgages
The interest rate is adjusted every year, so the monthly payment is subject to change every year for the entire 30 year loan term. This is the best choice for those who want to take advantage of lowest rate possible and are willing to accept yearly payment changes - OR - cannot qualify at higher rate programs.

 

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