Loan Structures

Four different loan structures, explained.

Fixed Rate

The most popular type today is called a fixed-rate mortgage. In this situation, you lock in a specific interest rate and pay the same amount each month over the life of the loan.  Common terms are 15, 20, or 30 years, but we have lenders who allow any annual increement from 7-30 years.

Adjustable-Rate (ARM)

ARM’s are especially popular in higher interest rate times and for higher net worth individuals. They have a low introductory rate  to save you money, then when the specified term expires (typically 5, 7 or 10 years) the interest rate adjusts. There’s potential to save money, but you could end up with a higher monthly payment down the road.


A balloon loan, which is most often seen with second mortgages, your payment is amortized over a longer term, then the balance of the loan comes due all at once.  A common example is a “30 due in 15” whereby your payment is based on a 30 year term, but in year 15 the remaining balance is due in full.

Fully Amortized vs Interest Only

Think of these as subcomponents of the above.  Fully amortized means your monthly payment will include both interest and principle, so your balance will go down in time.  Interest only means exactly that: your monthly payment will not include any principle, so your balance will stay the same