Mortgage Dictionary

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Two-Step Mortgage

The two-step mortgage is a type of adjustable-rate mortgage (ARM) that "adjusts" one, and only one, time. Typically, a two-step mortgage has one interest rate for the first 5, 7, or 10 years of loan and a different interest rate for the remainder of the loan. The lender sometimes has the option to call the loan due with 30 days notice prior to the adjustment.

See also:   Adjustable-Rate Mortgage (ARM)