See Mortgage Insurance. In addition, the loan payment goes up and down depending on the actual financial conditions of the economy which can be an advantage if interest rates remain constant or decline during the life of the loan. The disadvantage of this type of loan is that your exact payment over time is unpredictable and can increase. Fixed calculator to compare loan types or for more definitions about how ARM's are adjusted . A method of retiring or liquidating a debt by making periodic and regular installment payments.
Amortization is the basis for fixed rate mortgages.
This is the actual rate of interest your loan would be if you included all of the other associated costs such as closing costs and points. The advantage of this type of loan is that the initial rate is usually lower than a normal fixed rate loan. The disadvantage of this type of loan is that you may have to refinance or pay off the loan if you do not sell the home by the time the loan matures. The process of paying additional points on the loan to reduce the monthly mortgage. In a Permanent Buydown, a sufficient amount of interest is prepaid to lower the rate permanently.