Loan Type Comparisons
Not sure which loan is best for your situation? Here’s some information
about loan types and term lengths to help you understand the differences.
Fixed and variable rates
A fixed rate mortgage applies the same interest
rate toward monthly loan payments for the life of the loan. This
gives you stable payments
for the loan term, but usually higher monthly payments than an adjustable
rate mortgage.
Points to consider with a fixed rate mortgage:
- Since your monthly principal and interest payments stay the same
regardless of interest rate changes, you know what to expect
- Your initial monthly payments may be
higher than an adjustable-rate mortgage.
An adjustable rate mortgage does not apply the same
interest rate toward monthly payments for the life of the loan. Your
principal and interest
payment will adjust periodically according to your mortgage contract
based on changes in the interest rate.
Points to consider with an adjustable rate mortgage:
- Your initial interest rate and monthly payments may be lower than
a fixed-rate mortgage.
- You may qualify for a higher loan amount due
to lower initial interest
rates.
- In the future you may have lower interest payments if
the interest rate drops over time, or higher interest payments
if the interest
rate rises.
How do you decide?
If you expect to be in your home a long time and it’s important
that your mortgage payment remains the same every month, except
for taxes and insurance, then
you’ll
want to consider fixed-rate loans.
You may also consider an adjustable
rate loan where the initial rate is locked in for a longer time.
For example, with our
6/2 ARM the initial rate is locked for the first six years.
If your down payment is less than 20%, no PMI helps
keep your payment lower.
If you’re
interested in a lower payment to start out and comfortable with
periodic changes to your mortgage interest rate, then you
may want to consider
adjustable-rate
mortgages.
back to top 30-year and 15-year loan terms
A loan "term" is how many years it will take to pay off your mortgage.
Points to consider with a 30-year term:
- Your monthly payments will be lower than with a shorter term
- You may have a somewhat higher interest rate
- You'll pay
more interest over time
Points to consider with a 15-year term:
- Your monthly payments will be higher than with a longer term
- Your interest
rate is usually lower
- You will be building your home equity faster
If you can afford higher payments and want to build equity quickly,
a 15-year term may work for you. If you want lower payments or
want to qualify for a larger loan amount, a 30-year term may
be a good choice.
Use our online
calculator to learn how much you can save with a 15
year mortgage. If you have specific questions about loan types and terms, please call
us. Our mortgage specialists will be happy to help you.
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