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Mortgage Loans

Explanation of popular types of loans
FIXED RATE MORTGAGE LOANS:
   These type of mortgage loans charge a fixed rate of interest for a specified period of years
(i.e. 30 years, 20 years, 15 years, 10 years).
Benefits: Since the interest rate never changes during the mortgage loan, the borrower will always know what his/her monthly payment will be for budgeting purposes.
TWO-STEP/RESET MORTGAGE LOANS:
   These type of mortgage loans charge a fixed rate of interest for a specified number of years (typically 5 or 7 years). Once this initial term has been reached, the interest rate adjusts based on current market interest rates. This newly adjusted rate will be the interest rate that the borrower would pay for the remainder of the mortgage loan.
Benefits: These mortgage loans charge a slightly lower interest rate than 30 year fixed rate mortgage loans, so the borrower' monthly mortgage loan paymnent will be slightly lower. The borrower will also have payment stability for at least 5 or 7 years, depending on the program chosen.
ADJUSTABLE/VARIABLE RATE MORTGAGE LOANS:
   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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