ARMs offer lower initial interest rates that adjust periodically based on market conditions. Key Features: • Initial Rate Period: Lower fixed rate for a set period (e.g., 5, 7, or 10 years). • Adjustments: After the fixed period, the rate adjusts annually based on an index and a margin. • Risk: Payments may increase significantly after the adjustment period. Ideal Buyer: • Plans to sell or refinance before the rate adjusts. • Comfortable with potential fluctuations in monthly payments.
7. Bridge Loans
Bridge loans provide short-term financing for homeowners who are buying a new home while waiting to sell their current one. Key Features: • Term: Usually 6-12 months. • Down Payment: Used as a down payment on the new home. • Repayment: Paid off when the current home sells.
Ideal Buyer: • Transitioning between homes. • Has equity in their current property.
8. Interest-Only Loans
Interest-only loans allow buyers to pay only the interest on the loan for a set period, followed by higher payments when the principal is added.
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