The most common
type of mortgage program where your monthly payments for interest
and principal never change. Property taxes and homeowners' insurance
may increase, but generally your monthly payments will be very stable.
rate mortgages are available for 30 years, 20 years, 15 years
and even 10 years. There are also "bi-weekly" mortgages, which shorten
the loan by calling for half the monthly payment every two weeks.
(Since there are 52 weeks in a year, you make 26 payments, or 13
"months" worth, every year.)
Fixed rate fully
amortizing loans have two distinct features. Firstly, the interest
rate remains fixed for the life of the loan. Secondly, the payments
remain level for the life of the loan and are structured to repay
the loan at the end of the loan term. The most common fixed rate
loans are 15-year and 30-year mortgages.
During the early
amortization period, a large percentage of the monthly payment is
used for paying the interest . As the loan is paid down, more of
the monthly payment is applied to the principal. A typical 30-year
fixed rate mortgage takes 22.5 years of level payments to pay half
of the original loan amount.
mortgages are short-term loans that have some features of a
fixed rate mortgage. The loans provide a level payment feature during
the term of the loan, but as opposed to the 30-year fixed rate mortgage,
balloon loans do not fully amortize over the original term. Balloon
loans can have many types of maturities, but most balloons that
are first mortgages have a term of 5 to 7 years.
At the end of
the loan term, there is still a remaining principal loan balance
and the mortgage company generally requires that the loan be paid
in full, which can be accomplished by refinancing. Many companies
have other options such as a conversion feature at the end of the
term. For example, the loan may convert to a 30-year fixed loan
at the thirty-year market rate plus 3/8 of a percentage point. Your
conversion can be guaranteed based on certain criteria, such as
having made your last 24 payments on time. The balloon mortgage
program with the conversion option is often called a 7/23 Convertible
or 5/25 Convertible.
is Vice-President of Internet Operations for Sharp Mortgage Group,
a zero-down home mortgage specialist. Click here for more about
VA home loans and mortgage
rates for Virginia.