Other Types of Mortgage Loans

There are many di"erent types of loans. This chart lists some of the more popular types.
These loans o"er a low interest rate and a relatively "xed

Hybrid ARM payment. A 3/1 has a !xed monthly payment for three years and
3/1, 5/1, 7/1, or 10/1 then converts to a traditional adjustable rate mortgage based on
the market.

Adjustable Rate Mortgage with low introductory rates. These

Option ARM loans are essentially extinct after the housing crisis of the late
2000s. Negative amortization may occur with these loans.

With this type of loan, the interest rate changes only once. For
example, with a 7/23 loan, the interest rate changes at the end of 7
Two-Step of 7/23 or years. After 7 years, the borrower must pay the entire loan balance
5/25 (Balloon Reset) in a balloon payment, re!nance to a new loan, or the interest rate
on the existing loan resets, typically higher than the market rate.
A loan designed to help borrowers with a small down payment
avoid PMI. This is really two loans: A !rst trust deed for 80% of the
Piggyback property value and a second trust deed for about 10-15% of the
property value. The borrower must have the remaining 5-10% as a
down payment.
A seller, builder, or buyer can o"er to make a lump-sum payment

Buydown at the beginning of the loan that is used to subsidize the monthly
payments for the !rst couple of years.

This type of loan is designed for the "rst-time homebuyer.

Graduated Payment Monthly payments are smaller in the !rst few years and grow to
(GPM) their full level after three to !ve years.
Home Appreciation
Loan or Shared
Appreciation Mortgage
(HAL/SAM)

Lenders loan a homeowner money with minimal or zero interest.

The lender receives the original amount borrowed when you sell,
re!nance, or pay o" the loan. In addition, the lender receives an
agreed-upon percentage of the homes appreciation. If no
appreciation occurred, the lender will receive no extra money.

Pledged Asset
A mortgage using non-retirement accounts as collateral.
Mortgage
A zero-down loan o!ered to veterans and guaranteed by the VA.
Lenders receive a 2% service fee for processing the loan, so your
VA Loan rate should re$ect that as a discount. Because there is no money
down, rates may still be higher than a conventional loan, so be sure
to consider traditional mortgage options as well.
Generally used to consolidate credit card debt, this loan permits
No-Equity Loan borrowers with good credit to borrow as much as 125% of their
homes value.

2016 Financial Knowledge Network, LLC.

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