Fixed Rate Mortgages

40-year – Similar to the traditional 30-year mortgage, with an amortization term 10 years longer, the 40-year loan could help a borrower achieve greater purchasing power in getting into a home they could not otherwise afford by reducing their monthly payment and stretching it out over a longer time horizon.

35-year – Now, 35-year mortgage terms as well as 40-year mortgages are being offered to ease the burden of climbing real estate prices. Many find a 35-year mortgage term attractive because it reduces the mortgage payment or allows the borrower to afford a little more house, in this housing affordability challenged market.

30-year – The traditional 30-year fixed-rate mortgage has a constant interest rate and monthly payments that never change. This may be a good choice if you plan to stay in your home for seven years or longer. If you plan to move within seven years, then adjustable-rate loans are usually cheaper. As a rule of thumb, it may be harder to qualify for fixed-rate loans than for adjustable rate loans. When interest rates are low, fixed-rate loans are generally not that much more expensive than adjustable-rate mortgages and may be a better deal in the long run, because you can lock in the rate for the life of your loan.

25-year – The 25-year fixed rate mortgage combines the security of a 30-year fixed home loan enhanced by a slightly lower interest rate. It is popular among homeowners seeking a low fixed mortgage with faster amortization.

20-year – A 20-year fixed mortgage refinance is a type of mortgage loan that replaces an existing mortgage loan; the new debt is structured with a 20-year maturity and an interest rate that stays the same throughout those 20 years.

15-year – This loan is fully amortized over a 15-year period and features constant monthly payments. It offers all the advantages of the 30-year loan, plus a lower interest rate—and you'll own your home twice as fast. The disadvantage is that, with a 15-year loan, you commit to a higher monthly payment. Many borrowers opt for a 30-year fixed-rate loan and voluntarily make larger payments that will pay off their loan in 15 years. This approach is often safer than committing to a higher monthly payment, since the difference in interest rates isn't that great.

10-year – A 10-year fixed rate mortgage is a loan that has an interest rate that stays the same for the 10-year term of the loan. The principal of the amount is reduced, slowly at first, and then at an accelerated pace, of the life of the loan.

Jumbo
A jumbo loan is for a mortgage with a loan amount above the industry-standard definition of conventional conforming loan limit by Fannie Mae, Freddie Mac and Ginnie Mae. These agencies bundle and resell mortgages to investors. These mortgages have a higher interest rate than a conventional mortgage.

Reverse Mortgage
A reverse mortgage (or lifetime mortgage) is a loan available to seniors, and is used to release the home equity on the property as one lump sum or multiple payments. The homeowner's obligation to repay the loan is deferred until the owner dies, the home is sold, or the owner leaves (e.g., into aged care).

Conventional Mortgage
This refers to a fixed-rate, 30-year mortgage that is not insured by the government (FHA, Farmers Home Administration (FmHA) or Veterans Administration). In this mortgage the interest rate will not change during the entire term of the loan.

Interest Only
Initially the borrower pays only the interest on the mortgage over a fixed term in monthly installments. At the end of the interest-only pay period, the unpaid balance of the loan for the principal and any additional interest is then paid off in either a lump sum or in installments.

FHA Loans
The Federal Housing Administration (FHA) insures mortgages, making it easier for families that would normally be excluded from purchasing a home to purchase a home. FHA helps to make home buying during a recession easier for people. It also has programs to finance military housing and homes for veterans.
The most common FHA program is the fixed rate mortgage. The FHA fixed mortgage is open to anyone using the property as a primary residence. FHA fixed mortgage loans require lower down payments than conventional mortgages - as low as 3 percent, compared to up to 10 percent for most conventional mortgages. This means the loan to value on the property can be as high as 97 percent.

VA Loans
A mortgage that is guaranteed by the Department of Veteran's Affairs and made available to a borrower with a low down payment used to help American servicemen or women and/or their spouses secure financing for a mortgage purchase. Only service members who have received honorable discharges and who have served 90 days or more may qualify for VA loans.

Construction Loan
It is a short term and interim loan to pay for the construction costs of building homes. It is in the form of periodic payments by the lender to the builder as the work progresses.

Second Mortgage
A mortgage made subsequent to the previous one or subordinate to the first one. The lenders of the second mortgage get paid after the first mortgage is paid so second mortgages may be considered riskier. For this reason, higher interest rates and points for the transaction may be charged.

Rural Housing
An agency of the US Department of Agriculture that provides farmers or other non-urban inhabitants financing to purchase land or homes when they cannot get a loan from other financial providers. These loans have low interest rates and usually require no down payment.

Buy Down Mortgages - 2/1 & 1/0
A 2-1 Buy Down is a feature that allows for a temporary interest rate reduction on a fixed-rate mortgage. In exchange for an upfront fee, the lender lowers the mortgage's permanent rate by 2 percent in the first year, and 1 percent in the second year. In the third year, the mortgage reverts to its permanent rate. With a 1/0 Buy Down, the first-year rate is 1% below the permanent rate for the first year and then reverts to the note rate for the duration of the loan. Sellers sometimes pay for the buy down as an incentive. Buy downs are used on purchases only.