Finding the right mortgage is very important. Saving as little as a quarter of a point over the life of a thirty year mortgage can save you thousands and thousands. Similarly, paying slightly more a month and cutting 15 years off the length of a mortgage can also save you thousands. .
In addition to the length of the mortgage term there are two main types of mortgages. The first is a fixed rate mortgage and the second is an adjustable rate mortgage. In a fixed mortgage, the interest rate is set for the entire duration of the loan. Thus payments for principal and interest will not change over the life of the loan.
An adjustable rate mortgage starts like a fixed mortgage with the interest rate fixed for a certain period of time, perhaps 3 or 5 years. After that period, the rate will periodically adjust up or down based on some market index.
Because of their shorter term, an adjustable rate mortgage transfers some of the interest rate risk from the lender to the borrower. Because of the lower risk for the bank they can offer a lower starting interest rate than a comparable fixed rate mortgage.
The table below will help you find the right combination for your needs. It is a quick and easy way to compare mortgage terms, interest rates and features.