When it comes to the various options that you can get for buying your house, a two-step mortgage may be just the thing you need. Being that it is kind of a cross between both a fixed rate mortgage and an adjustable rate, it may provide just the option you want in a time of financial uncertainty. Here are some things you need to know about second step mortgages.
A two-step mortgage, like its name implies has two different parts to it. Often called a hybrid loan, it combines some of the features of both types into a typical 30-year mortgage. The first part of the mortgage, which is usually either 5 or 7 years, has a fixed rate so that the interest and payment stay the same. This part of the loan is typically lower than the market value giving the buyer some savings during this time.
At the end of the first period, an adjustment will take place, which will determine what the payments will be for the remainder of the 30 years. Since a two-step mortgage is typically more of an adjustable rate mortgage, at least at this time, the adjustable rates will now kick in. Generally, and this is something you want to make sure is in the terms, there is a limit placed on how much...
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