Loan Services


Fixed-Rate Mortgages:

Fixed-rate mortgage products (for 1st mortgage only):
Monthly principal and interest payments do not change over the term of the loan, which means your mortgage expenses are easily anticipated. If you believe interest rates are going to increase, this may be the best option for you.

Advantages:

  • Predictable monthly payments
  • Less risk if market conditions cause rates to rise
  • Rate does not change

Disadvantages:

  • You pay more in interest
  • Higher interest rate
  • Unable to take advantage of lower interest rates due to favorable market conditions
Adjustable Rate Mortgages:

The mortgage interest rate on this loan will be fixed for a stated period of time and will then become adjustable for the remainder of the loan. For example, a 5-year fixed (30-year) loan would have a fixed interest rate for the first five years and then convert to an adjustable rate for the remaining 25 years.

This adjustment is based on changes in a pre-selected index, and will take place according to a pre-defined schedule (generally once a year). Your interest rate and monthly payment will fluctuate based on changes in your index. The most common indices are the Treasury Bill, Certificate of Deposit (CD), LIBOR and COFI.

Adjustable rate loans have more risk due to the possibility that the interest rate could increase. However, because you are assuming additional risk the lender will generally reward you with a lower interest rate and monthly payment during the initial fixed interest period. These loans are of particular benefit to borrowers that plan to either sell the property or refinance before reaching the adjustable period.

Advantages:

  • Flexibility
  • Lower initial monthly payment
  • You pay less for short term ownership
  • Easier to qualify for higher loan amounts

Disadvantages:

  • More risk
  • Inability to predict future housing costs
  • Potential higher payments (at max. interest rate)
Balloon Mortgages:

A balloon mortgage has uniform monthly payments up to a predetermined date and a lump sum or "balloon" payment due at the end of the loan period to complete the payoff of the loan. Because of the structure of the payment schedule, the uniform monthly payments tend to be lower than those for many other types of fixed rate or standard adjustable rate products. Balloon mortgages usually have a predetermined refinance option (the terms are not negotiable) that the borrower may use if they believe they will have difficulty paying the balloon payment. A balloon loan might be attractive to someone who planned on selling his or her home before the balloon payment was due.

Advantages:

  • Low interest rate
  • Shorter term financing
  • Low monthly payments
  • Protection from rate increases

Disadvantages:

  • Potential unfavorable refinance terms
  • If you do not refinance, you have to pay balance at end of term
  • Risk foreclosure if you cannot make balloon payment
Stated Income Mortgages:

In qualifying for these products, the lender will not require you to provide standard explanations of your income, such as tax returns. This means that there is no verification of your income, but you must state the source of your income. Individuals likely to be interested in a stated income loan are typically self-employed or individuals who write-off a large portion of their income such as contractors, waiters & waitresses.

Advantages:

  • Don't need to verify income

Disadvantages:

  • Higher rates
  • Need a low LTV to qualify
Prepayment Penalty Mortgages:

Loans with prepayment penalties generally offer lower interest rates, however the lender will penalize you if you wish to pay off part or all of the loan balance in advance of the predetermined schedule. Generally, prepayment penalties for ARM products would be incurred if you made full or partial prepayments within three years from the date of your note. A prepayment penalty on a fixed rate product would be incurred if you paid off the loan balance early. The penalty varies by product.

Advantages:

  • You get a low rate
  • If interest rates go up, you have a favorable rate

Disadvantages:

  • You may be penalized if you refinance, sell or make additional payments
  • If interest rates go down, you have to keep your loan
Combination Loans:

A combination loan is a loan that has a first and second mortgage combined. Usually, a combination loan is used when a borrower does not have the usual 10 to 20 percent for a down payment. For example, one type of combination loan is an "80/10/15." On this loan, you get a first mortgage for 80 percent of the loan amount, and a second mortgage at the same time for the remainder of the loan balance. Call your loan specialists and they will help you decide if this kind of loan is right for you.

Advantages:

  • Avoid PMI
  • Potential tax advantages

Disadvantages:

  • Possibly higher monthly payments
  • Two monthly payments instead of one
Interest-Only Loans:

Advantages:

  • Minimize monthly payments
  • Keep your cash available for investment

Disadvantages:

  • Balance of the loan does not decrease over time
Asset-Backed Loans:

Advantages:

  • Keeps your assets fully vested
  • Minimal up front cash needed
  • No need for mortgage insurance

Disadvantages:

  • Risk liquidating your portfolio if you default
  • Can not liquidate your pledged portfolio
Home Equity Line of Credit:

A home equity line of credit is a form of revolving credit in which your home serves as collateral. Think of it as a credit card that is secured by the equity in your home. Many homeowners use these credit lines for major items such as debt consolidation, travel expenses and home improvements.

Advantages:

  • Flexible access to funds
  • Potential tax advantages
  • You only draw what you need
  • You only pay interest on what you borrow

Disadvantages:

  • Ties up equity making it unavailable for other needs
  • Higher interest rate than a first mortgage
Home Equity Loan:

A home equity loan enables you to borrow money in a lump sum against the equity (the value of your home minus what you owe) you have built up in your home. This loan is subordinate to the existing first mortgage. Buyers commonly use a second mortgage to keep their first mortgage in the conforming range (which keeps the rate lower) and to avoid PMI. Home equity loans are often used to pay off credit card debt, buy a car or to make major renovations to a home.

Advantages:

  • Predictable fixed payments
  • Possible tax advantages

Disadvantages:

  • Ties up equity making it unavailable for other needs
  • Higher interest rate than a first mortgage
  • Cannot pay down and withdraw additional funds