Financing Needs

Fixed Rate Mortgage
A fixed rate mortgage (FRM) is a fully amortized loan completely paid off by equal monthly payments. All of the payments remain the same amount throughout the life of the loan. As payments are made, the amount of the payment applied to principal increases and the amount applied to interest decreases. You will find terms for fixed rate mortgages available anywhere from 10 to 30 years, typically in 5-year increments

Adjustable Rate Mortgage (ARM)
An adjustable rate mortgage (ARM) permits periodic adjustment of the interest rate according to a predetermined index and margin. The index must not be under the control of the lender. Examples of popular indexes are 10 yr. Treasury Bills and the LIBOR (London Interbank Offered Rate).

Adjustments usually occur in 1 mo. 6 mos., 1 yr., or 2-yr. increments. ARMS have a maximum amount allowable at each adjustment and a maximum lifetime cap, which is the most the loan, can ever cost.

These adjustments may result in changes in the payment amount, the outstanding loan balance, the loan term, or any combination of these variables. Ask your Buyer's Choice Representative for a full explanation.

Buy Down Mortgage
A buy-down mortgage is a loan in which interest is subsidized for a temporary period.
You may have seen "3-2-1 buydown available" in an ad. This simply means assuming a 7% interest rate - you will pay
4% the 1st year
5% the 2nd year and
6% for the 3rd year.
7% for the 4th year and throughout the remaining life of the loan
Builders, developers, sellers, relatives, employers, or owners generally offer buy-downs.By paying a specified amount of interest to the lender, the effective rate and interest cost for the borrower are reduced for the buy down period.

A buy down can be a great program for entry level homeowners whose income is likely to increase over the first 3 years of the loan. Borrowers who expect to move within 3-5 years after obtaining the loan can also benefit.

Bi-Weekly Mortgage
A bi-weekly mortgage requires payments every two weeks. The 26 annual payments reduces the cost of a 30-year mortgage to 21 years. The mortgage payments must be drafted from the borrower's bank account. A bi-weekly mortgage can help borrowers gain equity in their property sooner. The greatest benefit is realized in substantial interest savings!

Home Equity Line of Credit (HELOC)
A home equity mortgage is a revolving line of credit against a percentage of the equity in your home from which a borrower may obtain multiple advances as needed.

Home equity mortgages have been wildly popular in recent years. Homeowners like being able to use their equity in any way they see fit. Many owners use their LOC to finance home improvements, education for children, vacations, medical emergencies and any number of other reasons.

Reverse Mortgage
A reverse mortgage allows a borrower who owns property free and clear to receive regular monthly payments from a lender who has accepted the property as collateral. Many lenders will allow borrowers to choose a lump sum payment, regular monthly payments or access a line of credit.

A reverse mortgage, most commonly used by retirees, allows homeowners to gradually convert the equity in their primary residence into cash, while retaining ownership and possession of the property. A reverse mortgage ultimately results in continuing negative amortization.

Interest Only Term Mortgage
A term mortgage is an non-amortized loan for a specified period. Interest only is paid periodically with the entire principal balance due in one lump sum at maturity.

Balloon Mortgage
A balloon mortgage is a partially amortized loan with some periodic payments of both principal and interest; however at maturity the remaining principal balance is due in a lump sum payment know as a balloon payment. A balloon payment is any amount more than twice the regularly scheduled payment.

Private Financing
Private financing is an often overlooked form of financing that can be particularly attractive to both parties in certain situations. For example, assume you have not been able to save 20% for a down payment on a home. If the home is paid for, and many homes are, or the seller has substantial equity, you could obtain financing for 80% and the seller could hold the second mortgage for you. You could also have a rich relative who would be willing to finance the home, however most of us don't have that luxury and seek other sources of funding. Don't forget those rich relatives could give you a "gift" that could help with your down payment requirements.