Choosing a Mortgage Type

Below is a chart of mortgage types which includes both their advantages and disadvantages.

30 Year Fixed

  • Interest rate is higher but never changes.
  • Recommended if interest rates are low and you plan to own the home for over 15 years.

15 Year Fixed

  • Interest rate is lower than a 30 year fixed and never changes.
  • Payment higher than 30 year fixed but the mortgage is paid off in half the time.
  • Recommended if your expected long term income can support the higher payment.

10 / 1 Adjustable Rate (ARM)

  • Interest rate is fixed for 10 years, lower than a 15 year fixed and you aren’t required to pay on principle until after the 10 years. Then the rate adjusts yearly to current market rate.
  • Recommended for maximizing buying power if you plan on selling within 10 years and expect the value to rise.

7 / 1 Adjustable Rate (ARM)

  • Interest rate is fixed for 7 years, lower than a 10 year ARM and you aren’t required to pay on principle until after 7 years. Then the rate adjusts yearly to current market rate and principle payments begin.
  • Recommended for maximizing buying power if you plan on selling within 7 years and expect the value to rise.

5 / 1 Adjustable Rate (ARM)

  • Interest rate is fixed for 5 years, lower than a 7 year ARM and you aren’t required to pay on principle until after 5 years. Then the rate adjusts yearly to current market rate and principle payments begin.
  • Recommended for maximizing buying power if you plan on selling within 5 years and expect the value to rise.

2 / 1 Adjustable Rate (ARM)

  • Interest rate is fixed for 2 years, lower than a 5 year ARM and you aren’t required to pay on principle until after 2 years. Then the rate adjusts yearly to current market rate and principle payments begin.
  • Recommended for maximizing buying power if you plan on selling within 2 years and expect the value to rise.

Choosing the best mortgage type should be based on your specific situation. This includes your ability to pay off the loan in a given time, when you expect to sell your home, and what payment you can afford. In order to protect yourself financially, it is highly recommended that your mortgage rate is fixed for at least as long as you plan to be responsible for the loan payments.

 

Before you apply, understand the process:

Allow us to walk you through each step in researching and obtaining the proper home loan that fits you.

  1. Mortgage Introduction
  2. Understanding Your Financial Situation
  3. Choosing a Mortgage Type
  4. Shopping for a Mortgage Company
  5. Getting Your Mortgage Purchase Loan Pre-Approved
  6. Taking Advantage of Realtor Services
  7. Finalizing Your Purchase Mortgage Loan

 

Why is Mortgage Purchase Loans non-bias?

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