A type of loan that has a low interest rate for the first 5 or 7 years, then adjusts to a higher interest rate for the remaining 25 or 23 years

Two-step mortgages are ideal for first-time buyers and if you have a job that demands that you relocate often. Your monthly loan payments are lower for those first years than a regular 30-year fixed loan, and when it's time to adjust to the higher rate, you can do so at no cost. The new rate that you get after 5 or 7 years though can be high, which is when most people decide to move. Two-step mortgages are also called resets.

Compare: Adjustable rate mortgage