Here is the some brief information about some of the popular mortgage plans available in market.
Adjustable Rate Mortgage(ARM)
An adjustable rate mortgage or variable rate mortgage is a loan secured on a property (house) whose interest rate and therefore monthly repayment vary over time.- 1/1 ARM: An adjustable rate mortgage that has a set initial interest rate for the first year. After that period, the mortgage rate adjusts each year. Each annual rate adjustment is based on (or "indexed to") another rate, often the yield on a U.S. Treasury note. (Also called a "hybrid mortgage.")
- 2/1 ARM: An adjustable rate mortgage that has a fixed interest rate for the first 2 years. After that period, the mortgage rate adjusts each year.
- 3/1 ARM: An adjustable rate mortgage that has a fixed interest rate for the first 3 years. After that period, the mortgage rate adjusts each year.
- 5/1 ARM: An adjustable rate mortgage that has a fixed interest rate for the first 5 years. After that period, the mortgage rate adjusts each year.
- 7/1 ARM: An adjustable rate mortgage that has a fixed interest rate for the first 7 years. After that period, the mortgage rate adjusts each year.
- 7 year balloon payment mortgage: A loan where the payment is calculated over 7 years. At the end of this term, the remaining amount must either be paid off or refinanced. Balloon loans sometimes include convertible options that allow the remaining amount to automatically be transferred into a long-term mortgage.
- 10/1 ARM: An adjustable rate mortgage that has a fixed initial interest rate for the first 10 years. After that period, the mortgage rate adjusts each year. (Also called a "hybrid mortgage.")
- 5 year balloon payment mortgage: A loan where the payment is calculated over 5 years. At the end of this term, the remaining amount must either be paid off or refinanced. Balloon loans sometimes include convertible options that allow the remaining amount to automatically be transferred into a long-term mortgage.