Types of Loans

Long Term Fixed-Rate Mortgages

The traditional 20 or 30-year fixed-rate mortgage has a constant interest rate and monthly payments that never change. This may be a good choice if you plan to stay in your home for seven years or longer. If you plan to move within seven years, then adjustable-rate loans are usually less expensive. As a rule of thumb, it may be harder to qualify for fixed-rate loans than for adjustable rate loans. When interest rates are low, fixed-rate loans are generally not that much more expensive than adjustable-rate mortgages and may be a better deal in the long run, because you can lock in the rate for the life of your loan.

Shorter Term Fixed-Rate Mortgages

These loans are fully amortized over a 7, 10 or 15-year period and features constant monthly payments. They offer all the advantages of the 20 or 30-year loan, plus a lower interest rate—and you'll own your home twice as fast. The disadvantage is that, with a 7, 10 or 15-year loan, you commit to a higher monthly payment. Many borrowers opt for a 30-year fixed-rate loan and voluntarily make larger payments that will pay off their loan in 7, 10 or 15 years.

Adjustable Rate Mortgages

These increasingly popular ARMS—also called 3/1, 5/1,7/1 or 10/1—can offer the best of both worlds: lower interest rates (like ARMs) and a fixed payment for a longer period of time than most adjustable rate loans. For example, a "5/1 loan" has a fixed monthly payment and interest for the first five years and then turns into a traditional adjustable-rate loan, based on then-current rates for the remaining 25 years. Those who plan to move (or refinance) before or shortly after the adjustment occurs may want to consider this choice.

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All loans subject to credit approval. Restrictions apply; see banker for details.