Advanced Search

Initial Interest Fixed-Rate Mortgages
A fixed-rate mortgage with interest-only payments for an initial period

Related Products

With Initial Interest Fixed-rate Mortgages*, you can meet the needs of qualified borrowers looking for financing options that provide them more flexibility with their financial resources.

Featuring interest-only monthly payments for a significant period of time, Initial Interest Fixed-rate Mortgages allow your borrowers to channel initial monthly payment savings toward other investment opportunities. Plus, they can make principal payments to reduce their monthly payments and start building equity in their homes any time during the initial interest-only period.

We offer these Initial Interest Fixed-rate Mortgage options for one-unit primary residences and second homes:

  • Initial Interest 10/20 Fixed-rate Mortgage – a 30-year fixed-rate mortgage with a 10-year initial interest-only period followed by a 20-year fully amortizing period.
  • Initial Interest 15/15 Fixed-rate Mortgage – a 30-year fixed-rate mortgage with a 15-year initial interest-only period followed by a 15-year fully amortizing period.

Initial Interest Fixed-rate Mortgages are assessed using Loan Prospector®, our automated underwriting service, to streamline the origination process for you and your borrowers. And, you can take advantage of our selling system for an easy, highly competitive cash or securities sale.

As with all Initial Interest Mortgages, Initial Interest Fixed-rate Mortgages are not for all borrowers, and should be offered appropriately only to borrowers who clearly understand and qualify for the potential payment increases.

*Please refer to our November 15 [PDF 209K] and December 21 [PDF 127K] Single Family Seller/Servicer Guide Bulletins for a revised delivery fee rate structure and delivery fee rates for Initial Interest Mortgages with certain secondary financing structures effective on March 1, 2008 and May 1, 2008, respectively.

Product Features

FeatureRequirements

Property Type
  • 1-unit primary residences, including condominiums and PUDs.
  • Second homes
  • Manufactured homes and co-ops are not eligible.

Eligible Mortgage Products
  • 10/20 Initial Interest Fixed-rate Mortgage
  • 15/15 Initial Interest Fixed-rate Mortgage
  • Originate with Financed Permanent Buydown Mortgages and Mortgages for Newly Constructed Homes (Newly Built Home Mortgages – Site-built only).

Transaction Type
  • Purchase
  • No cash-out refinance
  • Cash-out refinance

Maximum LTV Ratios (without secondary financing)
  • Purchase and no cash-out refinance: 95% LTV
  • Cash-out refinance: 90% LTV

Eligibility/Underwriting
  • Loan Prospector Accept
  • The borrower is qualified using monthly housing expense that includes, but is not limited to, the principal and interest payment on the mortgage that is calculated as described in the Single-Family Seller/Servicer Guide (Guide) Section 37.15.
  • For the purpose of qualifying the borrower, the principal and interest payment must be based on a fully amortizing payment schedule for the term of the mortgage.
  • The borrower must be qualified using payments calculated using the Note Rate.
  • Principal curtailments are permitted at any time.
  • Loan Prospector's Property Inspection Alternative cannot be used.

Execution Options
  • Servicing-released Cash*
  • Servicing-retained Cash
  • Fixed-rate Guarantor
  • MultiLender Swap

* See our selling system availability matrix [PDF 90K] for a list of specific mortgages eligible for sale best efforts or mandatory, servicing released.

Delivery Fees
  • An Initial Interest Mortgage postsettlement delivery fee will be assessed for mortgages with LTV ratios greater than 90%.
  • See Guide Exhibit 19 for details on these fees and all other applicable fees or visit Exhibit 19 [PDF 402K].

Special Delivery Requirements
  • You must represent and warrant that you have implemented processes and controls to ensure that borrowers with Initial Interest Mortgages received written disclosure addressing payment shock, negative amortization (if any), prepayment penalties and the cost of reduced documentation loans, as appropriate, and that such disclosure is provided in a timely manner as discussed in the Interagency Guidance.
  • You must deliver all mortgage data required by Form 11 including Date of First P&I Payment, Monthly P&I Payment, Reference Code 0012 and Modification/Conversion Date.

Single-Family Seller/Servicer Guide

  • Refer to Guide Chapter J33.

Download an Initial Interest Fixed-Rate Mortgage fact sheet [PDF 192K] for more details.

Lender Benefits

Initial Interest Fixed-Rate Mortgages help you:
  • Meet the needs of borrowers looking for financing options that provide flexibility to take advantage of other investment opportunities.
  • Offer interest-only monthly payments for a significant period of time.

Benefits for Your Borrowers

Initial Interest Fixed-Rate Mortgages help your borrowers:

  • Minimize financing costs for the short-term for borrowers who do not plan to stay in the house past the interest-only period.
  • Use monthly cash savings toward other financial investments.
  • Make principal curtailment payments during the interest-only period to reduce their monthly payments if at any time the borrower wants to increase their home equity rather than take advantage of other investment opportunities.

For More Information

Training Opportunities

Training Events workshop Workshop     webevent Web Event
Servicing Initial Interest Mortgages - 43 min
Mortgage Products: More Choices for More Borrowers - 1 day

The information in this document is not a replacement or substitute for information found in the Single-Family Seller/Servicer Guide and/or the terms of your Master Agreement and/or Master Commitment.


© 2008 Freddie Mac