Fixed rate mortgage:
 
Interest rates on fixed rate mortgages do not change during the life of the loan. Standard loan periods are 15 or 30 years, with some banks offering 20 year or 40 year terms. The fixed mortgage has the advantage of an unchanging interest rate, with steady monthly payments. The interest rates on fixed rate mortgages are higher than adjustable rate mortgages, because of the added security and certainty of future payments. The interest rate may be higher on longer repayment term. For current interest rate, please click “mortgage request” and “mortgage interest rate”.

Adjustable rate mortgage:

Adjustable rate mortgage products have various terms and are based on different indexes. Conditions are complex, so it is recommended to consult a professional before making your decision. For further information, please visit our website and click on ‘mortgage request’ and look under the ‘mortgage interest rate’ column to find available adjustable rate mortgage products and latest interest rates.

1. Standard adjustable rate mortgage
   The interest rates on adjustable mortgages change based movements in a debt market index rate over the course of the repayment period, with no fixed period. The index varies from product to product and a margin is added to this index to determine the interest rate. This margin is based on the over all creditworthiness of the loan. The interest rates will adjust as often as monthly or as infrequently as every twelve months.
   
   
2. Short term fixed adjustable rate mortgage (hybrid mortgages)
   Adjustable rate mortgage products will often have a period of time when the interest rate is fixed. For a fixed number of years, the interest rate does not change. This period of time varies and it is most commonly fixed for 3, 5, 7, or 10 years. After the end of the fixed period, the interest rate will begin to change based on the index and the margin stated to the borrower at the time of closing. It is important for the borrower to be aware of which index is used and what the margin is. The rate will adjust every 3 to 12 months and the payments will consequently vary from one adjustment period to the next. These mortgage products offer lower rates than fixed rate mortgages, and the shorter the fixed term, the lower the interest rate will be. The life time cap rate, or maximum interest rate on these loans are generally 5% above the initial rate and also cannot increase more than 2% each year.
   
   
3. Option ARM
   Another type of adjustable rate mortgage allows the borrower to choose from different payment options. Some common payment options are: (1) lowest starting rate payments, (2) interest only payments, and (3) fully amortized payments based on 15 or 30 year payout schedules.
   
   (1). Of these payment options the lowest is the one most aggressively promoted by banks and is seemingly most attractive to the potential borrower.  This program applies a low starting rate of 1% to 1.95% in the first few years; however, this is only a minimum payment rate.  The actual rate being applied to your loan (and ultimately what you owe the bank) is the going market rate, which is much higher.  The resulting difference between what you pay the bank and what you owe the bank (which is higher) is then added back to the principal amount you initially borrowed.  The borrower will end up with a higher loan balance than when the loan was closed.  Also, payments will rapidly begin to rise as the minimum payment incentive period ends. The borrower needs to be fully aware of the consequences, the growing loan balance as well as rising mortgage payments can be quite a shocking burden. In addition, when refinancing, 2% to 3% prepayment penalty is imposed on the borrower with rare exceptions. It is an excellent program for borrowers who expect to be earning more money in the future, but again, it is critical that the borrower be fully aware of the consequences and their future obligations.
   
   (2). Interest only payment option is as its name indicates a payment plan of paying only the interest for a specified time period. This has the advantage of not increasing the principal while keeping the monthly payment low and allows the borrower to make repayments to principal when they are able.
   
   (3). The Option Arm programs do offer payments based on fully amortizing (meaning paying both principal and interest) 15 year or 30 year fixed rates schedule, which are usually 3 to 5% higher than their low starting rate of 1% to 1.95%.
   
   

   It is important to know what the life time cap of the interest rate (the maximum interest rate of the loan) is on the loan as this number can be up to 14% and in some cases as high as 16%, much higher than the cap of 5% above the initial rate on a standard adjustable rate mortgage.

Equity is the difference in the value of the property and the mortgage balance owed to pay for the current residence.  For example, if the current value is $225,000 and the balance in the mortgage is $75,000 then the equity left in the home is $150,000. Commonly, home equity applicants use the money for remodeling, or for setting aside money for their children’s education, or consolidating higher interest rate debt, such as credit card debt. The advantage of a home equity mortgage is that the interest rate is less expensive than that of a credit card or other consumer loans while offering the borrower some tax benefits.

A home equity loan uses the equity on the residence as collateral to obtain an additional loan, or a second mortgage.  Much like the first mortgage loan, a fixed rate loan with amortization periods of 10, 15 or 20 years is available. Because the rate is fixed for a long period of time, the interest rate on an equity loan is usually 0.5% to 2.0% higher than an equity line – product description is just below. The loan is a fixed amount and the entire loan amount is given to the borrower after the closing. 

A home equity line of credit is different from a loan in that the entire loan amount is not given to the borrower after closing, but it money that is available to the borrower whenever they need it. Very much like a credit card line, the borrower may borrow and repay the loan amount at anytime during the life of the loan.  The borrower is only responsible for payments on the outstanding balance. The line is most commonly available for 30 years, with the first 10 years having interest payments only applying an adjustable prime based interest rate. After 10 years, principal and interest will be paid on the remaining balance using a 20 year amortization schedule.