How to Choose a Mortgage Term

Different mortgage terms and rates can make the loan selection process confusing, especially if you don't plan on keeping the loan for the full term.

Today’s loans are primarily 15- and 30-year mortgages. Homebuyers will often have two rate options: fixed-rate and adjustable-rate mortgages (ARMs).

In a fixed-rate mortgage, the interest rate is locked in for the life of your loan, meaning you’re protected even as the markets change. ARMs are more complicated. The initial interest percentage is generally lower than the market competition — making it appealing to buyers — but that rate changes on a pre-determined schedule. Often payments end up much higher after the first few years of the loan.

Consider these pros and cons when choosing a mortgage term.

15-year Mortgage Rates

If your goal is to own your home sooner than later — twice as quickly, actually — then look to the 15-year mortgage. You’ll likely snag a more favorable interest rate, which means huge interest savings over the course of your loan. Plus, you’ll start building equity more immediately. Just be aware that the shorter loan means bigger monthly payments and less money for your rainy-day fund or college savings plan.

  • Pros: Lower interest rate, long-run savings, quicker equity
  • Cons: Increased monthly payment, smaller loan qualification

30-year Mortgage Rates

The 30-year mortgage has made the dream of buying a home a reality for countless Americans. You’ll make smaller monthly payments and qualify for a higher loan amount — and that’s why about 90% of homebuyers opt for the 30-year mortgage, according to Freddie Mac. These more manageable payments mean you’ll have more freedom to achieve your other financial goals, too.

  • Pros: More affordable monthly payments, frees up capital for savings
  • Cons: Higher interest rate, significantly more interest paid

Mortgage Rate Calculator 

Invest in Your Future

Buying a house is an investment in your financial future. Whether you’re saving to buy your first home or you own your home, our wealth management advisors can provide the support you need to achieve your financial goals.