Mortgage Information (co-ops & Condos)
Fixed Rate Loan – This is the most desirable product with a fixed interest rate for the entire life of the loan, generally for 30 years duration. Each monthly payment consists of repayment of principal plus interest. Consult your mortgage broker or bank for today’s rates as they vary.
Adjustable Rate Loan (ARM) – This product generally has a fixed part where the interest rate stays the same and then after that period expires, the interest rate becomes variable and adjusts annually. Common ARM time periods are 3,5,7 year ARMS, where the numbers denote how long the ARM’s interest rate is fixed. Generally ARM’s offer lower introductory interest rates during the fixed portion and then usually go higher during the variable portion. For protection most ARMs have a rate cap which denotes how much the interest rate can rise in a year.
Interest Only Loan (ARM) – Similar to a traditional ARM, in this case you are only paying the interest on the loan and no principal for a set period of time. This will allow you to pay less money per month for the period of paying just the interest and then as the period of interest only expires, the payments will increase. You need to make sure that if you wanted to that you can also pay off some principal during the interest only period.
Negative Amortization Loan – Potentially dangerous product as you are paying less than the interest due on the loan per month. As this happens the loan amount keeps growing which can leave you in a precarious position.
Home Equity Line of Credit (HELOC) – Mostly utilized as a 2nd loan on a purchase to cover an additional amount. For example, you can get a loan based on 80% of the loan to value ratio, so for the additional 10% of financing you might get a HELOC and be able to finance 90% of the purchase price. Generally HELOCs are tied to the Prime Rate.
Rate Lock – When you and the lender agree to a specific rate for a loan, you’ll get a rate lock for a specific time where in order to receive this rate you’ll need to close the transaction within that timeframe. If that timeframe expires you will have to purchase an extension and it is possible that the rate can change. Generally they are provided in 30 or 60- day locks with the longer time period providing higher rates. You need to be careful as there are many unforeseen delays in New York real estate so choose your time wisely to lock a rate
Conforming Loan – This is a loan under a certain amount, generally approx.
- One-family loans: $417,000 *Currently this number is higher, check with a mortgage professional.*
- Two-family loans: $533,850
- Three-family loans: $645,300
- Four-family loans: $801,950
That is traded by Freddie Mac and Fanny Mae in the secondary mortgage market (they are government agencies and offer stability to these loan rates). For 2008 only the amount has been increase $729,750 due to economic conditions.
Jumbo Loan – A loan above the conforming amounts is a Jumbo loan. They are bought and sold in the secondary market by private investors and generally will have higher interest rate.
Loan To Value Ratio – The money borrowed relative to the price of the property. LTV of 80% means you are getting a loan for 80% of the purchase price.
Points – Something you can buy from your lender to reduce the interest rate of your loan.