Fixed Rate Mortgage (FRM)- The interest rate and therefore, mortgage payment stays fixed for the term of the loan. The fixed rate mortgage loan term is usually 15, 20, or 30 years. Some lenders also offer 40 and 50 year terms.

Adjustable Rate Mortgage (ARM) - The interest rate is fixed for a certain period and then adjusts periodically according to an index and margin. Common indexes for an adjustable rate mortgage are prime rate, LIBOR, T-Bill, COSI, COFI and MTA. ARM loans usually have provisions, or caps, which limit how much the loan rate can increase at one time and over the life of the loan. 

Balloon Mortgage - The final payment is due as a lump sum at the end of the term of the balloon loan. Balloon Loans are generally described as X due in Y. Example: 30 due in 15 (this loan is amortized over 30 years and is due in 15 years, so there will be a balloon mortgage payment due at the end of 15 years).

Blanket Loan - Secures several parcels of property. Developers generally use a blanket loan when they purchase a large tract to be subdivided into individual parcels. The developer requires a "partial release" clause so that individual parcels can be released from the blanket loan as they are sold.

Bridge Loan - A short period bridge loan is generally 2 weeks to 3 years, and is taken out to secure other projects, such as new construction.

Equity Loan - A mortgage placed on real estate in exchange for cash to the borrower. These are normally interest only loans. The borrower can apply funds toward the principal of the equity loan at any time thus reducing their interest payments.

Hard Money Loan - Real estate serves as collateral. The lender acquires a lien on the property and if the hard money loan is not repaid as agreed the lender may take the property and sell it to repay the loan. Higher interest rates and lower loan-to-values (LTV's) are normal.

Interest Only Loan - For a set term, the borrower pays only the interest on the capital. At the end of the term the principal balance is still due. To calculate the monthly payment for an interest only loan multiply the loan amount by the interest rate and divide by 12.

Option Arm - Also known as "pick-a-pay" or "payment option". Gives 4 different payment options each month: minimum payment, interest only, 15 year amortized, or 30 year amortized. The option arm loan has been around for over 20 years and was originally created for "investors" to help with cash flow. Payment option loans can propose a tremendous opportunity if utilized correctly, or impose a disappointment if not fully understood properly.

Reverse Mortgage - A way for a borrower to convert their equity into cash while retaining ownership. The cash from a reverse mortgage can be a lump sum, monthly payments, a line of credit, or all three. To qualify you must be 62 and have paid off all or most of your mortgage.