Fixed Rate Mortgage (FRM)
Fixed rate Mortgage is a type of loan that maintains a specified interest rate for the lifetime (or maturity) of the mortgage.
According to the Federal National Mortgage Association, first-time buyers often choose to go with a fixed rate mortgage because they want low monthly payments throughout the loan term. Buyers can also reap the greatest cumulative tax deductions available over the loan term when applying for the fixed rate mortgage.
Of course there are cons: generally, lenders require 20% down payments on conventional fixed rate mortgages, while with the Federal Housing Administration insurance, for instance, only 5% is required. Private Mortgage Insurance (PMI) can also help buyers purchase a home with only a 10% down payment. While buyers purchase private mortgage insurance (PMI) through private companies, lenders normally acquire the insurance for the buyers. So, first-year premiums are usually between .35% and 1.65% of the total loan amount, and depending on policy requirements, buyers must pay the premiums either in advance or monthly.
A twist on the 30-year fixed rate mortgage is the shorter term fixed rate mortgage, with either a 10 or 15-year loan term.
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Popular Mortgage Terms
The highest rate possible under an ARM contract; same as 'lifetime cap.' It is often expressed as a specified number of percentage points above the initial interest rate. ...
Adjustable rate mortgages on which the interest rate is mechanically determined based on the value of an interest rate index. Indexed ARMs are distinguished from Discretionary ARMs, in that ...
The monthly index is a ratio of monthly interest costs to total funds, expressed as a percentage. Annualized interest, the numerator, is calculated by multiplying the deposit balances at ...
Employees of lenders or mortgage brokers who find borrowers, sell and counsel them, and take applications. Loan officers employed by mortgage brokers may also be involved in loan ...
The period between payment changes on an ARM, which may or may not be the same as the interest rate adjustment period. ...
A mortgage on which interest is calculated daily based on the balance on the day of payment, rather than monthly, as on the standard mortgage. ...
Equations used to derive common measures used in the mortgage market, such as monthly payment, balance, and APR. ...
A mortgage on which the borrower gives up a share in future price appreciation in exchange for a lower interest rate and/or interest deferral. SAM's in the private market had a brief ...
Every ARM is tied to an interest rate index. An index has three relevant features:availibility, level, volatility. All the common ARM indexes are readily available from a published source, ...
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