Loan Term/Interest Rate Type
Loan Term
15 Years/ 30 Years/Other
The term of your loan is how long you have to repay the loan.
This choice affects:
- Your monthly principal and interest payment
- Your interest rate
- How much interest you will pay over the life of the loan
Interest Rate Type
Fixed-Rate Mortgages protect you against rising rates since the interest rate remains the same for the entire term of the loan. Plus, you have the flexibility of selecting a 10, 15, 20, 25 or 30-year term (depending on the loan type).
The main difference is the lower term options have higher monthly payments, which also means you are building home equity faster. Keep in mind you can use equity as a down payment for a new home if you sell your existing home or take out equity with a cash-out refinance.
Fixed-Rate Mortgage Highlights
If you plan on staying in your home for a longer time frame, a fixed-rate mortgage could be the right solution for you since this option features:
- Consistent monthly payments and interest rates
- Protection from rising interest rates
- Mortgage tax interest deduction*
- Different term length options
*This does not constitute tax advice. Please consult a tax advisor regarding your specific situation.
Adjustable Rate Mortgage (ARM)
An Adjustable-Rate Mortgage (ARM) is a loan term option with interest rates that can change periodically after the initial fixed-rate period. After this introductory period, monthly payments are susceptible to increases or decreases based on market fluctuations, which can also affect the monthly payment.
Adjustable-Rate Mortgage Highlights
An ARM might be the right option for you if you plan on moving within 7 years since they feature lower introductory interest rates. If interest rates are expected to fall, a homeowner could potentially reduce their monthly payments with the lowered interest rates. Highlights of an adjustable-rate mortgage include:
Lower initial monthly payments
Possibility to qualify for higher loan amounts
Rates and Payments may decrease based on the index rate
Various types of ARM loans include Hybrid ARMs such as 10/1 year, 7/1 year, 5/1 year and 3/1 year programs.
