A seven year mortgage, sometimes called a 7/1 ARM, is designed to give you the stability of fixed payments during the first 7 years of the loan, but also allows you to qualify at and pay at a lower rate of interest for the first five years.
One of the shortest mortgage loan terms you can get is an 8-year mortgage. While less popular than 15- and 30-year home loans, an 8-year mortgage loan will allow you to aggressively pay down your home loan, and, in turn, own your home outright in less than a decade.
Choosing to refinance 7-year ARM loans is a big decision, but it can be worthwhile to many homeowners. For example, folks who opt for a 7/1 ARM can choose to refinance into a fixed-rate or another adjustable-rate loan before the fixed period expires. This allows the homeowner to continue paying a low interest rate.
A 7/1 ARM is a good option if you intend to live in your new house for less than seven years or plan to refinance your home within the same timeframe. An ARM tends to have lower initial rates than a fixed-rate loan, so you can take advantage of the lower payment for the introductory period.
Quicken Loans offers an 8-year fixed-rate mortgage through its YOURgage program. This loan program allows borrowers to choose any loan term from eight to 29 years. Quicken's 8-year terms option was the lowest fixed-rate term we've found from lenders online.
A 10-year mortgage presents a useful opportunity for homeowners who want to pay off their loan sooner rather than later. Although these mortgages are less popular, they are widely available. Luckily, most major mortgage lenders offer a 10-year mortgage. That includes Rocket Mortgage®.
If you're approaching retirement with a steady income, the 10-year fixed-rate mortgage may be a good choice. This may be ideal for those looking to close out their mortgages sooner rather than later. However, it's vital that anyone considering this loan be prepared for retirement with a healthy retirement fund.
Another con of an ARM is that your loan terms and interest rate may at first be more lenient because of the lower monthly payments. So, if you want to refinance down the line into a fixed rate, it could be difficult to get approved for the same size mortgage loan.
Why Get a Balloon Mortgage? People who expect to stay in their home for only a short period of time may opt for a balloon mortgage. It comes with low monthly payments and a much lower overall cost, since it is paid off in a few years rather than in 20 or 30 years like a conventional mortgage.
Variable-rate mortgages are often the best choice
According to many economic experts, in most cases variable-rate mortgages are more beneficial in the long-term compared to fixed-rate mortgages.
Refinancing will hurt your credit score a bit initially, but might actually help in the long run. Refinancing can significantly lower your debt amount and/or your monthly payment, and lenders like to see both of those. Your score will typically dip a few points, but it can bounce back within a few months.
The breakeven period is how long it will take you to pay off the costs of closing on a new mortgage and start realizing the savings from a lower rate and lower monthly payments. Andrews said for most people, it's only worthwhile to refinance if your breakeven period is two years or less.
You can refinance into any length of loan term, but a 10-year is best for borrowers who want to pay off their mortgage as soon as possible and have the resources to do so comfortably.
While taking a home loan from a bank or any other lender, amongst other important things, one has to decide the tenure of the loan i.e. the repayment period. Most lenders provide different loan tenure ranging from 5 years to as long as 20 years.
Though typically a mortgage lasts for around 25 years, you can get longer mortgages over 40 years. At the other end of the scale, short term mortgages can be for as little as six months to two or five years. Lenders have their own minimum terms which vary from no minimum to a 15-year minimum.
Yes. It's possible to get out of a fixed-rate mortgage during the introductory rates period under a number of different circumstances, but the vast majority of the time, leaving a fixed agreement early means paying early repayment charges (ERCs) and sometimes other fees.
These days, most mortgages are 15- or 30-year loans with fixed interest rates. But balloon mortgages still exist.
A balloon mortgage is usually rather short, with a term of 5 years to 7 years, but the payment is based on a term of 30 years. They often have a lower interest rate, and it can be easier to qualify for than a traditional 30-year-fixed mortgage.
Balloon mortgages are typical in some commercial lending situations, but they're not often used for consumer loans like mortgages. When it comes to home loans, there are several alternatives available, including: Conventional mortgages.
ARM benefits
The advantage of a 5/1 ARM is that during the first years of the loan when the rate is fixed, you would get a much lower interest rate and payment. If you plan to sell in less than six or seven years, a 5/1 ARM could be a smart choice.
When should a home buyer get an ARM? During periods of rising interest rates — like we've seen this year — ARMs offer a great option for borrowers to save money. As the Federal Reserve plans hikes for each of its remaining 2022 meetings, the mortgage rate surge could continue building momentum.
A 7/6 ARM is an adjustable-rate loan that carries a fixed interest rate for the first 7 years of the loan term, along with fixed principal and interest payments. After that initial period of the loan, the interest rate will change depending on several factors.
A lower debt-to-income ratio is preferred, although some loan programs allow a debt-to-income ratio as high as 50 percent. “When given a choice between 10 and 15 years, most clients opt for the 15-year mortgage as the rates are usually identical,” wrote Trott.
With a standard personal loan, you usually have between two and five years to repay the loan. Long-term personal loans can have loan repayment terms of up to 15 years. This makes the monthly payment more manageable but stretches interest costs over a longer period of time.
Here's a good sign mortgage rates might be moving even lower than they already are. Pontiac, Michigan-based United Wholesale Mortgage (UWM), which refers to itself as the #1 wholesale lender in the nation, has launched an exclusive new program that offers mortgage rates as low as 1.99% on the 30-year fixed.