Mortgage Term Glossary

The 2/1 Buy Down Mortgage allows the borrower to qualify at below market rates so they can borrow more. The initial starting interest rate increases by 1% at the end of the first year and adjusts again by another 1% at the end of the second year. It then remains at a fixed interest rate for the remainder of the loan term. Borrowers often refinance at the end of the second year to obtain the best long term rates; however, even keeping the loan in place for three full years or more will keep their average interest rate in line with the original market conditions.

30-Year Fixed Rate Mortgages have a fixed interest rate and principal payments that never change over the life of the loan. However, taxes and insurance included in the monthly payment are likely to change over time. Fixed rate mortgages have higher rates than adjustable rate mortgages, but when interest rates are low, fixed rate loans are not much more expensive. This loan is a good choice if you plan to stay in your home seven years or more because you’ve locked in your rate for the life of the loan.