Fixed-Rate Loans
Very stable loan program. Your monthly payment of principal and interest never change during the life of your loan.

Fixed-Rate Loans are available to you in 30-year, 20-year, 15-year and 10-year increments. During the amortization period of this loan, a large percentage of your monthly payment goes toward interest and a much smaller part towards principal. As the loan ages, the process gradually reverses itself.

If you want to lock in your rate for an extended period of time, you might choose a fixed-rate loan. If you currently have an Adjustable Rate Mortgage (ARM), refinancing with a fixed-rate loan can give you more monthly payment stability.

Adjustable Rate Mortgages (ARM)
These loan programs come in all different shapes and sizes. Generally, ARMS determine your payment based upon an outside index (i.e., 6-month Certificate of Deposit (CD) rate; 1-year Security rate; COFI and others. The rate will adjust every six months or once per year.

In addition, ARM Loan programs have a ‘cap’ on interest rates rising in one year (i.e., no more than two percent) even if the underlying index rises faster. Also, there may be a ‘cap’ on your monthly payment to keep in line. In addition, almost all ARM programs have a ‘lifetime cap’. Your interest rate can never exceed that cap amount, regardless of the circumstance.

In most cases, ARMS offer their lowest, most attractive and beneficial rates at the beginning of the loan period. This rate can be guaranteed anywhere from 1 month to 10 years based upon your program. For example, a “5/1 ARM” program means that the introductory rate is set for five years. Over that 5 year span, you are paying the interest only towards the loan. After this time period, the loan adjusts according to an index every year thereafter for the life of the loan.

These loans are advantageous for people who anticipate moving (prior to the ‘lower rate’ ending on the loan; people reaping the benefits of the lower introductory rate; looking to refinance again. With ARMS, you do risk your rate going up, but you also take advantage when rates go down by pocketing more money each month that would otherwise have gone toward your mortgage payment.