My little forum on mortgage loans
Banks offer higher interest rates for fixed rate mortgage loans than for adjustable rate mortgages to cover for this eventuality. A convertible home mortgage loan begins as an adjustable rate loan, but you have a period of time during which you are allowed to convert to a fixed rate. This is a good choice of loan if interest rates are currently high, but you foresee a drop in rates. You can take advantage of the lower interest rate of an adjustable rate home mortgage when interest rates are high, then lock in a better interest rate for the life of the loan as soon as rates drop. A balloon home mortgage begins with an unusual introductory period during with you pay a fixed rate that is almost as low as that for an adjustable rate mortgage loan, instead of paying the higher interest rate of a normal fixed rate loan.