Comparing Fixed-Rate Mortgages

Many people buying a home and shopping mortgages will eventually face the decision: “fixed or ARM?”  It’s a risk-vs-cost decision. Here’s some perspective about fixed-rate options.

15-year Terms are the shortest of the commonly-available fixed rate plans.  Interest rates are usually lower for 15-year loans.  Payments reduce loan principal earlier, so you build equity (ownership) faster.  And, of course, the loan is paid off earlier.

30-year Terms are the longest terms allowed, and probably the most common.  For perspective, though, keep in mind that for most 30-year loans, the first 23 years of payments pay off more interest than principal.  This may mean larger tax deductions, but it also means more interest paid.

Keep your plans for living in mind; how long will you be in this home?  What payments make financial sense?  Look at the short-term and long-term math for eligible loan amounts, interest rates and payments to make the best decision for your situation.

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