Loan Decisions

Typical Purchases – Depending on your long-term goals for your new home, you will need to decide what type of mortgage best suits your needs: a fixed rate or a fixed-period ARM. If you plan on owning the home for longer than 10 years, you may want to lock in a fixed rate at these historic low interest rates. If you plan to sell or refinance the home in 5-10 years then a 5/1, 7/1 or 10/1 ARM could be your best bet. You will want to match your exit strategy with the fixed term on the loan to reduce the uncertainty posed when the rates adjust. See below for more detailed explanations of each program.

Typical Refinances – Most people refinancing their existing mortgage are looking to lower their interest rate and monthly payment or pull cash-out using the equity in the home. Others are looking to switch from an adjustable rate loan to a fixed rate. Review the program descriptions below to learn more about the available options. If you have a fixed rate already, you may want to consider a shorter loan term depending on how long you have been paying on your current loan (30yr --> 25yr). This ensures that you do not start the 30 year amortization all over again. We recommend that you speak to one of our Mortgage Consultants to determine your best option.

Fixed Rate Loans

30 Year Fixed - The 30-year fixed rate mortgage is probably the most stable of all loan programs. Borrowers choose this type of loan because there is a set interest rate and payment for the life of the loan. This stability is beneficial if you don’t know how long you will own the home or whether interest rates will be higher in the future. The trade-off is paying a higher interest rate than you would on a fixed period ARM.

15 Year Fixed - 15-year fixed rate mortgages carry a lower interest rate than the 30-year fixed counterpart which reduces the overall cost of the money that you are borrowing. However, a 15-year fixed loan is amortized over half the period of time and results in a monthly payment that is on average about thirty percent higher than the 30-yr term. It is a great option if you can afford the higher monthly payment and want to pay your loan off in half the time.

Fixed-Period ARM

These ARM loans have a fixed interest rate for the first 5-10 years and then switch to an adjustable rate that is based on a specific index and margin. They are a great option for anyone looking to capitalize on a lower rate that is locked in for the initial part of the loan. The longer that your rate is fixed, the more stability you are buying, and therefore the higher the interest rate. If you know how long you will own the home or when you plan to refinance, then you can take advantage of the lower interest rates that come with a 5, 7 or 10 yr fixed-period ARM. This option could save you considerable money in interest over the life of the loan but does come with some risk if you keep the loan after the fixed period ends.

Interest-Only Loan

This option is available on most fixed rate and ARM loans. Typically, your monthly payment consists of principal + interest. With this program, you are only required to pay the interest portion on the loan and the principal balance stays constant. For our loans, the interest-only period is 10 years. When this period is over, the loan adjusts to a fully amortized payment (including principal) and the payment will reset to the higher amount for the remainder of the loan. The benefits to this program are that you can save money each month to invest, pay down other debt, or help out with bills. In addition, the lower payment allows you to potentially build equity in the home with less cash out of pocket. At any time during the interest-only period you can make a higher payment than the minimum and pay down the principal on the loan.