Loan Features

30-Year Fixed-Rate Mortgage

A 30-year fixed-rate mortgage (FRM) is a loan with the same rate and payment over the entire 30-year life of the loan.

Advantages

  • Since the repayment of the loan is stretched out over 30 years, the monthly payment remains relatively low 
  • Lower down payments

Disadvantages

  • Due to the longer term of the loan, you will pay much more interest over the 30 years than with a shorter-term loan

15-Year Fixed-Rate Mortgage

A 15-year FRM is a loan with the same interest rate and payment over the entire 15 year life of the loan. 

Advantages

  • Allows you to build equity more quickly than a longer-term loan
  • Generally provides a lower interest rate and you ultimately pay less interest over the life of the loan

Disadvantages

  • Monthly payments are higher than a longer-term loan

Adjustable Rate Mortgage

An adjustable rate mortgage (ARM) is a loan with an interest rate that changes (adjusts) periodically to reflect market conditions. The timing and calculation of the adjustments are determined by the loan program, and these details are disclosed in the mortgage documents.

Advantages

  • Significantly lower initial interest rate which may benefit borrowers that plan to live on the property for a short period of time or expect to pay off the loan within a few years
  • Save money for the period of the initial interest rate which is fixed – the shorter the initial fixed period, the lower the initial rate can be
  • May allow you to qualify for a higher loan amount and; therefore, a more valuable house

Disadvantages

  • If interest rates move higher after the initial rate period, your monthly payments will also increase which may lead to payment shock