How to Get a Convertible Mortgage
What it is
| At a Glance | |
|---|---|
| Loan Type: | Mortgage |
| Lender: | Bank |
| Secured: | Yes |
A convertible mortgage is a short term fixed rate mortgage which offers the same security as a closed mortgage, because it can be converted to a longer, closed mortgage at any time without penalty. Many homebuyers are interested in convertible mortgages because they offer the stability of an adjustable rate mortgage with the security of a longer term fixed rate mortgage. Convertible mortgages are also easy to qualify for and come with very low rates. They start with a low variable rate and then can be converted to a longer term fixed rate. This enables homebuyers who know their income will increase over the next few years to purchase better homes in better locations.
The convertible mortgage has a minimum loan amount of $10,000. The interest quoted at the time of application is guaranteed for up to 60 days. Also, these mortgages are convertible to many different types of closed term mortgages ranging from one to 10 years without prepayment costs.
Who it's for
The low interest rate of convertible mortgages is attractive to many first time homebuyers who are tired of renting and anxious to start building equity. Those who can apply include applicants whose mortgage will be 50 to 70 percent of the home's value. Typical applicants want to minimize the risk of varying payment amounts while keeping options open and believe that interest rates will decrease gradually within the next six months. Also, applicants will want time to think about the different closed-term mortgages to select.
What you need to do to apply
In order to obtain a convertible loan, interested borrowers should contact a lending institution and inquire about this specific type of mortgage. Banks will need confidence of repayment, a credit report, and other personal and financial information, as well as information about what the cash may be used for. A property appraisal may also be required.