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The preferred choice of prospective homebuyers. Generally ranges from 3 to 21 percent. Generally amortized over a period of 10 through 40 years. Main disadvantage rests in its inability to react to market conditions.
Has both short-term and long-term features. Interest rate is amortized over a period of twenty or thirty years. Pay-off of the unpaid principal is usually between three and seven years. The borrower has a principal and interest rate favorable on a thirty-year calculation but the entire principal will be due and payable in a very brief period of time. For example: In a 7/23-year balloon product, the principal and interest are amortized over a twenty-three year period, but the remaining principal will be due and payable at the end of the seventh year.
Usually start at a lower and more enticing rate which subsequently adjusts to a higher or lower rate depending on interest rate fluctuations. Adjustment periods can be anywhere from thirty days to several years. Amortized over a ten to forty year period but can change depending upon refinancing options or conversion rights exercisable over three-to five-year periods. Have a cap feature - base mortgage can only rise one or two points in a given year and up to five to six points over the life of the loan.
Graduated Payment Mortgage (GPM)
Reverse Annuity Mortgage