Multi-year mortgages
Fixed-rate
and
adjustable-rate mortgages
aren’t the only types available. There are hybrid mortgages
that combine elements of the two, and there are specialized mortgages
to help certain types of homebuyers.
Multiyear mortgages have a fixed rate for
an initial period, usually five, seven, or ten years, like fixed-rate
mortgages, and then are adjusted, like ARMs. The adjustment can
be a one-time change, or, more typically, regular changes over
the balance of the loan term.
The advantages
A big appeal of these mortgages is that the
borrower can get a lower rate on the fixed-term part of the mortgage
than if the rate were set for the entire 30 years. The lower rate
also means it’s easier to qualify, since the monthly payment
will be smaller. That can be a major advantage for first-time
buyers.
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