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Adjustable Rate Mortgage (ARM)
A mortgage whose interest rate changes over time based on an index and a margin. Rate changes are made at prescribed times and within prescribed limits (caps) as defined in the mortgage contract. |
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First Mortgage
A real estate loan with a lien (i.e., mortgage or deed of trust) on the subject property that has priority over any subsequently lien or financial encumbrances. |
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Interest-only payments
Mortgage payments that include only interest. No loan amortization occurs and, thus, the homeowner does not accrue any equity (unless the home value increases). |
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Two-Step Mortgage
A mortgage in which the borrower receives a below-market interest rate for a specified number of years (commonly seven or 10 years). At the end of the 10 years for example, the interest rate is adjusted (within certain limits) to market conditions at that time. The lender sometimes has the option to call the loan due with 30 days notice at the end of seven or 10 years. also called Super Seven or Premier mortgage. |
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