Determining the right type of loan for your circumstances depends upon several factors:
- Your current income and debts
- How you expect your finances to change
- How long you intend to keep your house
- How comfortable you are with the possibility your mortgage payments may change in the future
The first decisions are usually whether you prefer a fixed-rate mortgage or adjustable-rate mortgage (ARM), and how long your loan's term will be. Here's why:
- A 15-year fixed-rate mortgage can save you thousands of dollars in interest over the life of the loan, but your monthly payments will be higher than a 30-year fixed-rate, or most ARMs.
- An adjustable-rate mortgage may start out with a lower monthly payment than a fixed-rate mortgage, but your payments could increase when the interest rate changes.
The comparison table below can help you determine your preference. Once you decide, visit the fixed-rate mortgage or adjustable-rate mortgage sections of our site to learn more about the features and benefits of each.
Fixed-Rate Mortgage |
Adjustable-Rate Mortgage |
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I am comfortable with a monthly payment that may vary. |
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I believe interest rates are going to decrease. |
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I believe current interest rates are low. |
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I plan to stay in my home for more than five years. |
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I plan to stay in my home for less than five years. |
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Instead of a more expensive home, I want the lowest possible payments. |
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I'm interested in avoiding PMI with a combine second mortgage. |
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I'm interested in a low down payment loan program. |
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I'm interested in a VA loan. |
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I'm building a custom home. |
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My loan amount will be greater than $450,000. |
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I'm interested in an FHA loan. |
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