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9 Cards in this Set
- Front
- Back
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Fixed rate mortgage: Advantages
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stable payment
long lasting sheild from future intrest reat increases |
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fixed rate mortgage: Disadvantages
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intrest rate higher
monthy payment higher no benfits if markets intrest rates decrease |
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Graduated payment mortgage (GPM)
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Stair step graph; pay at lower rate and gradually increases, but lower payments arent large enough to cover the intrest costs. so costs you more in the end
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Negative amortization
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when the mortgage intrest rate rises, but the mortgage payment remains the same-- the monthly payment does not cover all the intrest owed
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Adjustible rate mortgage ARM
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can adjust over the life of the mortgage; 2parts Index- measure of intrest(used to capture the intrest movement), Margin- extra lenders add
ARM can adjust as often as every 3 monthes to 3-5yrs. |
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ARM; Advantages
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inital low intrest rate
initial low monthly payment caps reduce uncertainty longterm tax advantages |
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ARM: Disadvantages
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uncertainty about future intrest rates and payments
-negative amortization (w/payment caps) -maybe higher toat cost than fixed |
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Hybrid ARM's
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ARMS mixed with fixed rate and stable rate period
- 5/1 HybARM 5=#of yrs fixed and 1=1yr ARM after the first fixed time period |
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Frequency rate of change or adjustment interval
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tells how often the ARM mortgage intrest rate can change
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