Different types of mortgage loans
When it comes to financing your home, it’s important to understand the differences between the types of mortgage loans available so you can feel confident about the one you choose.
A fixed-rate mortgage offers a set interest rate over the term of the loan. Your monthly payments will remain the same throughout that term, which could be 10, 15, 20 or 30 years.
A fixed mortgage may be right for you if:
- You’re planning to stay in your home for at least five years.
- You want the security of knowing your interest rate won’t change.
- You like having a predictable monthly payment amount to budget your finances accordingly.
Just keep in mind that if a lower interest rate becomes available, a fixed interest rate mortgage will not allow you to automatically take advantage of the lower rate. Instead, you may need to refinance. Try this fixed-rate mortgage calculator to compare ARM and fixed-rate home loans.
Adjustable-rate mortgages (ARMs)
An adjustable-rate mortgage (ARM) offers a set adjustment period when the interest rate may increase or decrease, depending on current market conditions. The introductory interest rates for ARMs are usually lower than fixed rate mortgages during the fixed period. Rate caps are put in place so that the interest rate can never increase or decrease by more than the determined percentage over a pre-disclosed period of time.
An ARM loan may make sense if:
- You expect to live in your home for just three to-10 years.
- You stay up-to-date with market and real estate trends.
- You would benefit from the short-term financial relief that comes with a lower initial monthly payment.
Just keep in mind that your payments may increase once the loan’s introductory rate period ends. And monthly payments will be harder to predict, making it more difficult to budget for other expenses. Use this adjustable rate mortgage calculator to find out if an ARM is right for you.
Also known as ‘non-conforming’ mortgage, a jumbo mortgage may become an option if you’re planning to borrow more than $417, 000 for your primary residence. Just keep in mind that jumbo mortgages may have different interest rates and underwriting requirements compared to the traditional, ‘conforming’ mortgages.
If current interest rates are lower than the one on your current loan, you may be able to reduce your monthly loan payments by refinancing your loan. You also may be able to shorten the length of your loan, which may keep your payments the same or potentially increase depending on the rate and term.
Compare mortgage loan features and benefits
From rates to benefits, compare our mortgage options in the chart below to help you decide what type of borrowing solution is right for you.
|Fixed Mortgages||Adjustable-Rate Mortgage||Jumbo Mortgage||Mortgage Refinance|
|Interest Rates||Fixed||Variable||Fixed or Variable|
|Terms1||10, 15, 20 or 30 years||30-year with initial fixed rate period of 3, 5, 7 or 10 years||15, 30 years or 5/1 ARM|
Interest rate and monthly payment remains stable for the length of the loan
No pre-payment penalties
Variety of terms available
Usually lower monthly payments for the first few months or first few years
Allows you to purchase a more expensive property
May be able to secure a lower interest rate based on market conditions
Draw on your home’s equity to afford home repairs, consolidate debt or pay for education
Potentially shorten your mortgage term or replace one mortgage type with another
|Best If You||Plan to stay in your home for many years||Want to stay in your home for 3-10 years||Will buy a primary residence that is above $417, 000||Currently have a higher interest rate on your mortgage and have already built equity in your home|
|Learn more about our fixed-rate mortgages
Our Best Price Guarantee
All loans are subject to approval and rates and terms will vary depending on underwriting criteria including, but not limited to, credit bureau information, property type and value, and loan amount.
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How to get the best refinance rate on my mortgage without having hard inquiries on my credit report - Quora
If you only focus on getting the "lowest rate" you may be charged higher fees. It's like playing chess. If you only look at some pieces on a chess board, your opponent will take your queen or rook while you're not paying attention.