There are 4 major categories of mortgages:

1. Fixed Rate Mortgages, typically for 15 or 30 years
2. Adjustable Rate Mortgages
3. Second Mortgages
4. Home Eqity Lines of Credit (HELOC)

In a fixed rate mortgage, you are guaranteed the same interest rate over the life of the loan, typically 15 or 30 years. The monthly payments do not change and after the time period is up, you have paid off the loan. Shorter term fixed rate mortgages, like the 15 year, usually have a lower interest rate but higher monthly payments to pay the loan back more quickly.

The interest rate is usually lower than a fixed interest rate to start with. However, the interest rate will change in the future and so will your payment amounts. Most ARMs fix the interest rate for 1, 3, or 5 years to start and then the rate begins to float. It could go up or down depending on what index the rate is tied to.

Usually this is a fixed rate mortgage for a fixed period of time that is subordinate (takes second position) to a first mortgage on your property.

A HELOC sets a certain amount that you can borrow (a credit limit) over a predetermined period of time (the draw period). These are generally adjustable rate loans.

Your rate is determined by economic factors and then adjusted for things like: type of loan, amount of time your rate is guaranteed (lock period), up front costs you may decide to pay (points), the loan amount, especially if your loan is not conforming (under 417,000 right now), your credit score.

• How long does the initial rate last?
• How often will the interest rate change?
• What determines the new rate?
• How high could the rate possibly go?
• Is there a minimum interest rate?
• How much can the rate change?
• Will I be paying off the loan with my payments?

There are three major credit reporting agencies:
www.Equifax.com
www.Experian.com
www.TransUnion.com

Go to www.AnnualCreditReport.com to get a free copy of your credit report once a year.

See our Time To Refinance? page.