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Types of Loans

Thirty-Year Fixed Rate Mortgage

The traditional 30-year fixed-rate mortgage has a constant interest rate and monthly payments that never change. This may be a good choice if you plan to stay in your home for seven years or longer. If you plan to move within seven years, then adjustable-rate loans are usually cheaper. As a rule of thumb, it may be harder to qualify for fixed-rate loans than for adjustable rate loans. When interest rates are low, fixed-rate loans are generally not that much more expensive than adjustable-rate mortgages and may be a better deal in the long run, because you can lock in the rate for the life of your loan.

Example 30 Year Fixed: Loan amount $300,000, 20% down, monthly P & I payment $1,475.00, APR 4.389%.

Fifteen-Year Fixed Rate Mortgage

This loan is fully amortized over a 15-year period and features constant monthly payments. It offers all the advantages of the 30-year loan, plus a lower interest rate—and you'll own your home twice as fast. The disadvantage is that, with a 15-year loan, you commit to a higher monthly payment. Many borrowers opt for a 30-year fixed-rate loan and voluntarily make larger payments that will pay off their loan in 15 years. This approach is often safer than committing to a higher monthly payment, since the difference in interest rates isn't that great.

Example 15 Year Fixed: Loan amount $300,000, 20% down, monthly P & I payment $2,256.84, APR 4.495%.

Adjustable Rate Mortgage (ARM)

An Adjustable Rate Mortgage, or ARM, can be a powerful tool for homeowners. An ARM is a mortgage that offers a low introductory fixed rate term for a set period. After this period is over, the adjustable period follows for the remainder of the term. During this adjustment period the interest rates can adjust up or down, depending on the financial index it is attached to.

During the initial fixed period, the interest rates on an ARM are generally lower than fixed rate terms. This means lower monthly payments for ARM loans in the introductory period. If you plan on selling or refinancing your home in 5-7 years, the ARM could be a great option for lowering your rate and payments during that introductory fixed period. Lower interest rates and payments early in the life of the loan.

  • Mortgage payments and interest rates remain fixed for introductory period
  • Caps on interest limit the amount a rate can rise annually and over the life of the loan
American Pacific Mortgage a Division of American Pacific Mortgage Corporation NMLS #1850
3190 S. Bascom Avenue, #100, San Jose, CA  95661
Office:  (408) 559-0600
jackn@apacmortgage.com
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