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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.

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.

 Adjustable Rate Mortgages (ARM)

Against the advantage of the lower payment at the beginning of the loan, you should weigh the risk that an increase in interest rates would lead to higher monthly payments in the future. It's a trade-off. You get a lower rate with an ARM in exchange for assuming more risk.

10/1 ARM and 15/1 ARM
These increasingly popular ARMS, can offer the best of both worlds: lower intial interest rates and a fixed payment for a longer period of time than most adjustable rate loans.

For example, a "15/1 loan" has a fixed monthly payment and interest for the first fifteen years and then turns into a traditional adjustable-rate loan, based on then-current rates for the remaining 15 years. It's a good choice for people who expect to move (or refinance) before or shortly after the adjustment occurs.

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Crescent Credit Union NMLS #480403
115 Commercial Street / PO Box 4290, Brockton, MA  02303
Toll Free:  (800) 894-4445 Ext. 6364
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