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Conventional Refinance

Home Loan Types Refinance Loans Conventional Refinance

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, Cal Point Mortgage offers conventional mortgages to help you meet them.

Fixed Rate Mortgages (FRMs)

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 if market rates decrease.

Adjustable Rate Mortgages (ARMs)

An ARM can save you money on your loan, but there is a risk that market rates may increase during an adjustment period and make your monthly payments higher. However, you can set caps on your ARM.

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A periodic cap limits how much your rate can adjust at specified adjustment dates. A lifetime cap limits how much your rate can increase over the life of your loan. A payment cap limits how much your monthly payment can increase with each adjustment.

Eligibility

You must have sufficient income and credit history to qualify for a conventional mortgage.

Pros and Cons

Pros

  • Interest rates are set and won’t change.
  • Your monthly payment won’t change.
  • You’ll be protected from rate increases.
  • You may be able to refinance if market rates decrease.

Cons

  • Your initial interest rates may be higher than an ARM.
  • Your mortgage payments may be higher than an ARM.
  • Your interest rate won’t automatically lower if market rates decrease.

Adjustable Rate Mortgage

Pros

  • 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.

Cons

  • 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 interest on the loan.

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.

Related Information

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