Fixed-Rate Mortgages |  Adjustable-Rate Mortgages |  Other Mortgage Programs   Fixed-Rate Mortgages     A fixed-rate mortgage means the interest rate and the principal and interest payment payments remains the same for the entire life of the loan. (Taxes and applicable insurance, of course, may change.) Advantages: A consistent principal and interest payment makes this loan stable. The rate won’t change, so there is no need to worry about market fluctuations. A good choice if the customer is likely to stay in this house for a long time. Disadvantages: May cost your customer more - these loans are usually priced higher than an adjustable-rate mortgage. Your customer should keep in mind that, on average, most people move or refinance within seven years. If rates in the current market are high, your customer is likely to get a better price with an adjustable-rate loan.     Types of Fixed-Rate Mortgages     30 Year Fixed-Rate Mortgage 20 Year Fixed-Rate Mortgage 15 Year Fixed-Rate Mortgage     Adjustable-Rate Mortgages     An adjustable-rate mortgage (ARM) means that the interest rate changes over the life of the loan - according to the terms specified in advance. With ARMs:     The initial interest rate is usually lower than with a fixed-rate mortgage.     The monthly payment is also lower.     The interest rate may be adjusted (up or down) at predetermined times.     The monthly payment will then increase or decrease.     Most ARM programs do offer "rate cap" protection, which limits the amount the rate can increase, both each year and over the life of the loan.     All ARMs are amortized over 30 years.     Advantages: ARMs are usually priced lower than fixed-rate mortgages, allowing customers to increase their buying power while lowering initial monthly payments. If interest rates go down, borrowers will enjoy lower payments. Usually an ARM is the best choice for homeowners who plan to relocate (for example, with their company or the military), or for those who are purchasing their first home and plan to be in the property for only three to five years. Remember that, on average, most people move or refinance within seven years. Disadvantages: Your customer's monthly payments can increase if interest rates go up. Keep in mind that ARMs are best for homeowners who aren’t planning on staying with a property for a long period. If your customer is on a fixed income, an ARM (especially a short-term ARM) may not be their best choice. Note: If your customer is interested in an ARM mortgage, you are required to present certain information statements about these types of mortgages. Click here to access these documents.     Types of Adjustable-Rate Mortgages     10/1 Adjustable-Rate Mortgage 7/1 Adjustable-Rate Mortgage 5/1 Adjustable-Rate Mortgage 3/1 Adjustable-Rate Mortgage 10/1 Interest Only Adjustable-Rate Mortgage 7/1 Interest Only Adjustable-Rate Mortgage 5/1 Interest Only Adjustable-Rate Mortgage 3/1 Interest Only Adjustable-Rate Mortgage     Adjustable-Rate Mortgage Disclosures   10/1 Year Adjustable-Rate Mortgage Loan Information Statement 7/1 Year Adjustable-Rate Mortgage Loan Information Statement 5/1 Year Adjustable-Rate Mortgage Loan Information Statement 3/1 Year Adjustable-Rate Mortgage Loan Information Statement 10/1 Year Adjustable-Rate Interest Only Mortgage Loan Information Statement 7/1 Year Adjustable-Rate Interest Only Mortgage Loan Information Statement 5/1 Year Adjustable-Rate Interest Only Mortgage Loan Information Statement 3/1 Year Adjustable-Rate Interest Only Mortgage Loan Information Statement Consumer Handbook on Adjustable Rate Mortgages Other Mortgage Programs     7 Year Balloon Mortgage With a balloon mortgage, your customer starts out by making payments as they would with a full-term loan, but after a certain period the balance of the mortgage comes due. With 7 Year Balloons:     The mortgage is amortized over the full term of the loan repayment period.     At the end of a specific period, the balance comes due - a payment needs to be made.     With a 7-year balloon, your customer would make monthly payments for seven years that have been calculated based on a 30-year mortgage payment plan.     At the end of those seven years, the remaining principal balance is due and payable in full.   Advantages: Your customer gets a lower price on the loan, which will increase their buying power. Remember that their payments will be calculated as if the term were 30 years. Your customer will also usually have a conditional right to refinance after seven years, though on average most owners will have already made a change. If your customer has a lump sum of money on the way (such as an inheritance, bonus, or dividend payment), if they expect to relocate in a short period of time, or if they simply think they’ll be in a better position to refinance later, this may be a choice worth their consideration. Disadvantages: If your customer plans on keeping this property for longer than seven years, a longer-term loan may be a stronger choice.