Real Estate Glossary

What is Two-Step Mortgage?

A two-step mortgage is a type of adjustable-rate mortgage that has two distinct interest rate periods. The first period, usually five to ten years, has a fixed interest rate, after which the interest rate adjusts to a variable rate that is tied to an index. This type of mortgage is designed to provide borrowers with a lower initial interest rate, making it more affordable in the short-term, with the understanding that the interest rate will adjust in the future.