What Is A Two Step Mortgage

What Is A Two Step Mortgage

What is​ a​ Two-Step Mortgage?
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 of​ a​ percentage the​ interest can be raised - if​ the​ market calls for a​ raise .​
After this initial raise,​ the​ interest rate is​ adjusted yearly - according to​ the​ market.
This type of​ mortgage is​ good for someone who may be thinking of​ moving prior to​ the​ time that the​ mortgage rates are changed .​
If they are not certain that they will stay at​ that location then this would be a​ good way to​ go .​
Another possibility is​ that a​ two-step mortgage would allow someone with a​ lower income to​ get a​ larger house .​
This could work quite well especially if​ they are quite sure that their income will be improved over the​ next few years.
The main advantage of​ this type of​ mortgage,​ as​ with any adjustable rate mortgage,​ is​ the​ possibility of​ a​ large amount of​ savings if​ the​ market stays relatively good .​
Of course,​ this is​ really unpredictable,​ but it​ could serve as​ a​ good way to​ go .​
On the​ other hand,​ you​ may be forced to​ sell if​ the​ market does turn bad.
When you​ look for a​ mortgage,​ whether it​ be a​ two-step mortgage or​ any other kind,​ be sure to​ compare it​ with several offers .​
This way,​ you​ can see what others are offering and have something to​ compare your offer with .​
Be sure to​ separate the​ interest and principal from the​ various fees that will be applied .​
You want to​ compare the​ fees with the​ fees on​ other offers especially,​ because this is​ where any extras that there are will be added .​
It is​ a​ good idea to​ know the​ terms that apply to​ the​ various fees - some are really unnecessary,​ but you​ need to​ be able to​ tell the​ difference.

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