These type of mortgage loans charge an interest rate for a predetermined period of time that is chosen by the borrower (i.e. 6 months, 1 year, 3 years, 5 years, 7 years, 10 years). Once this initial ('introductory') term has been reached, the interest rate on the mortgage loan will be based on a predetermined index. The rate will be subject to periodic rate adjustments for the remainder of the loan. The frequency of rate adjustments will depend on the type of program the borrower chooses.
Benefits: The introductory rate on these mortgage loans are lower than the rates charged on the 30 year fixed rate mortgage loan. The shorter the introductory term, the lower the introductory rate. These lower rates mean a lower mortgage loan payment for the borrower, which can allow the borrower to afford more home.
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