Mortgage Dictionary -> Convertible mortgage
When it comes to traditional fixed-rate mortgages or even adjustable rate mortgages, you pretty much have no control. You either make the payments on time and stay on time with your mortgage, or you stop making the payments and default on it. Wouldn't it be good if you had at least some measure of control over your mortgage? Well, that's just what a convertible mortgage offers homeowners.
What is a Convertible Mortgage?
A convertible mortgage is a mortgage that starts off as either an adjustable rate mortgage or fixed rate mortgage and then can be converted to another type of mortgage after a certain period of time. All convertible mortgages must be kept as one type of mortgage for a specific amount of time before the homeowner is given the choice of converting it to another type of mortgage. While adjustable rate mortgages and fixed rate mortgages are the typical choices in convertible mortgages, some lenders offer borrowers the chance to convert to other types of mortgages.
Why are Convertible Mortgages Good?
Many homeowners who use convertible mortgages enjoy the fact that they at least have some control over the mortgage. They can choose when and whether or not to convert their mortgage to a different type of mortgage, which can, depending on the situation, save them a lot of money.
If you've been having a tough time deciding between the fixed rate mortgage and the adjustable rate mortgage, you probably like a convertible mortgage, as it allows you to get a feel for both kinds of mortgages. You won't be bound to one type of mortgage for the next 30 years.
You also will not have to worry as much about refinancing later, as you'll be able to convert the mortgage whenever it saves you money to do so, provided you've kept the current mortgage type for a long enough time. This is probably the biggest reason why convertible mortgages are chosen by homeowners, and is a good reason for you to at least consider convertible mortgages.