Convertible Mortgage Loans

Many customers are buying homes with an adjustable rate mortgage (ARM). These loans are easier to qualify for than fixed-rate mortgages, and they offer very low rates. But everyone wants long-term stability too, so they keep their eye on interest rates at all times. The moment rates start to tick up again, they want to lock in a fixed-rate mortgage. For buyers like this, convertible mortgage loans can be ideal. A convertible mortgage starts with a low variable rate, and then can be converted to a fixed rate.

Convertible loans are popular because they let homebuyers keep their options open and give them the maximum amount of loan flexibility. Convertible loans allow homebuyers to be their own banker. If they think fixed rates are headed lower, they start their loan with the lower rate of an ARM. Then they convert to a fixed rate either before the loan closes or wait up to five years after that to do so.

The convertible loan not only offers a lot of payment flexibility, it helps homebuyers qualify for a more expensive house. They will often use easier-to-get ARMs to qualify for their loan. This enables homebuyers, who know their income will be increasing over the next few years, to buy a more expensive home. When their income increases, their convertible loans allow them to convert to the comfort and stability of a fixed-rate loan.

Having this option available through a convertible loan has been a real benefit to many homebuyers who are tired of throwing money away on rent and are anxious to start building equity in a home.