Choosing a Mortgage Type

There are almost as many types of refinancing loans as there are home loans. The most common types of mortgages used to refinance are fixed-rate, bi-weekly, balloon and adjustable-rate mortgages. As a general rule, you should take these factors into consideration when selecting a mortgage program.

• Your current financial picture.
• How you expect your finances to change.
• How long you intend to keep your house.
• How comfortable you are with your mortgage payment changing.

Fixed Rate Mortgages are the most popular type of mortgage. It offers the peace of mind that your interest rate will remain the same for as long as you have your loan. If you expect to live in your home for many years, having the same interest rate may be your key concern. If you decide that you like the stable, predictable payments of a fixed-rate loan, you have the option of choosing from a variety of repayment terms: 15, 20, and 30 years are the most common. Typically, the longer the term of the mortgage, the more interest you pay over the life of your loan. However, stretching out your repayment term means your monthly mortgage payments will be less than they would be with a comparable shorter-term mortgage.

Adjustable-Rate Mortgages (ARMs) were first issued in the early 1980s when long-term interest rates were high and people needed a new type of financing to buy homes. These products start out with a lower interest rate, then the interest rate adjusts periodically. If you're confident that your income will increase steadily over the years, or if you plan to move in a few years and aren't concerned about potential rate increases, you may want to consider an adjustable-rate mortgage. With an ARM, your interest rate may move up or down as market conditions change. Interest rate changes typically are subject to two caps: one for each adjustment period and one for the life of your loan. When discussing ARMs with your lender, be sure to ask what the maximum interest rate adjustments can be for any ARM product you consider.

See below a general description of available loans

• Adjustable Rate Mortgages (ARMs).
  Searching for the lowest rates? An ARM may be your answer. However, the interest rate will change periodically, sometimes as soon as 6 months into your loan. Make sure to research the limit, or cap, on how high your ARM can adjust. Long-term ARMs (5+ years) may be good a choice if you have a fixed or declining income, and short-term ARMs (3 years or less) if your income is increasing.
• Fixed-Rate Mortgages.
  Planning on living in your house for more than 5 years and want the lowest monthly payment? A fixed-rate mortgage might be your solution. A 15-year fixed rated mortgage will allow you to amass your equity more quickly than a 30-year fixed-rate mortgage, but will produce higher payments.
• Balloon Mortgages.
  Planning on living in your house fewer than 5 years? A balloon mortgage might make good sense for you. It will allow you to pay shorter payments for a certain amount of time and one large payment for the remainder of the loan after a specified number of years.
• FHA/VA Mortgages.
  Are you a single parent or unable to afford a down payment? You may want to consider a FHA/VA loan. Once you get pre-approved, ask your community bank about these loan types. Click here to begin this process.
• Jumbo Mortgages.
  Do you need to borrow a higher loan amount? Jumbo loans will allow you to borrow more than $417,000, but typically carry a higher interest rate.