A Two Step program is a hybrid of the a fixed rate mortgage and adjustable rate mortgage. It has a low start rate that goes for an specific time period after which it adjusts once and remains fixed again for the duration of the loan
5/25 Two Step
With this loan the initial interest rate is fixed for the first 5 years and then adjusts to a fixed rate for the remainder of the loan (25 years). This product is usually offered with terms of 3 (3/27), 5 (5/25), and 7 (7/23) year options.
THE BENFITS OF A 2 STEP LOAN
* Low initial interest rate.
* Only adjusts once.
THE DETRACTORS OF A 2 STEP LOAN
* Rate may increase at the time of adjustment.
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