The loan features a 40-year total term with a fixed rate of interest for the first 15 years and then a one-time adjustment for the remaining term. The new program is offered in California, Oregon and Washington.
Two Step Mortgage borrowers can pay principal at any time on their own schedule. At the end of the 15th year, the interest rate automatically resets to the current market rate at that time and remains fixed for the next 25 years.
Craig Cole, senior vice president and division manager for residential lending at Union Bank of California, said: This is the perfect option for many borrowers who are either buying or refinancing a new residence, a vacation property, or an investment property. Borrowers can elect to make interest only payments during this time to better manage their cash flow and potentially maximize their home loan interest tax deduction.
