Maybe you’re looking to settle into a community or start a family. Or maybe you have a job that requires periodic relocation or lifelong passions that might lead you elsewhere. Whatever your long- or short-term goals are, CalPoint Mortgage offers conventional mortgages to help you meet them.
Fixed Rate Mortgages
With a fixed rate mortgage, your interest rate and payments will be consistent throughout the duration of your loan. You can rest assured knowing your interest rate won’t increase alongside market rates. You may also benefit from refinancing later if market rates decrease. Fixed rate mortgages are available in a variety of term lengths ranging from 10 years to 30 years.
Adjustable Rate Mortgages (ARM)
An ARM can save you money on your loan, especially if you’ll be living in the home for only a few years. ARMs are available in a variety of configurations and term lengths, with the most common being 3/1, 5/1, 7/1 and 10/1. In these figures, the first number represents the number of years your interest rate will remain fixed. The second number represents how often your interest rate will change after the fixed rate period expires (in this case, every year). This is called the adjustment period. Rates may increase or decrease during adjustment periods and make your monthly payments higher or lower respectively. However, you can set caps on your ARM to protect against rate increases.
You must have sufficient income and credit history to qualify for a conventional mortgage.
Pros and Cons
- Your interest rate is set and won’t change.
- Your monthly payment won’t change if market rates do.
- You’ll be protected from rate increases.
- You may be able to refinance if market rates decrease.
- Your initial interest rate may be higher than an ARM rate.
- Your mortgage payments may be higher than initial ARM payments.
- Your interest rate won’t automatically lower if market rates decrease.
Adjustable Rate Mortgage
- Your initial interest rate may be lower than a fixed rate mortgage.
- Your rate may decrease with market rates.
- Your monthly payment may decrease.
- You can set caps on rate increases and payment limits.
- Your rate may increase with market rates.
- Your monthly payment may increase.
- Payment caps may lead to negative amortization, which is when payments aren’t covering loan interest.
How long you plan to live in the home is important. For example, if you’re planning to live in your home for seven years, an adjustable rate mortgage may be more favorable. But if you’re planning to live in the home long-term, a fixed rate mortgage may be a better option.