Mortgage Comparison Tool
Make the Right Decision for You
Our mortgage comparison tool can help you evaluate the pros and cons of different home loans.
How It Works
Check out the loan options that you’re interested in learning more about.
Make your selections in our mortgage comparison tool.
We’ll show you the key differences between each loan option.
Your results will show here once you complete the questions above.
The Different Types of Home Loans Explained
Here’s what you should know about the different mortgage options.
30-year fixed-rate mortgage
Nearly 90% of homeowners have a 30-year fixed-rate mortgage, according to Freddie Mac in 2019. With this option, the interest rate on the loan doesn’t change over the course of a 30-year repayment period. A 30-year fixed-rate mortgage generally comes with lower, predictable monthly payments but higher interest rates compared to shorter loan terms. That means you’ll end up paying more total interest on a 30-year term.
15-year fixed-rate mortgage
With this mortgage option, you pay off the loan over 15 years, during which your interest rate stays the same. Because you’re repaying the loan in half the time compared to a 30-year mortgage, you typically have higher monthly payments. The upside is that a 15-year mortgage comes with lower interest rates, and you’ll pay less interest overall. You’ll also fully own your home sooner.
A cash-out refinance allows qualified borrowers to tap into the equity they’ve built over time and receive money to pay for home improvements, consolidate debt, or achieve other financial goals. Equity is your home’s value minus what you still owe on your mortgage. If you choose a cash-out refinance, then you’ll replace your existing mortgage with a larger loan, and pocket the difference in cash.
With an adjustable-rate mortgage, also known as an ARM, your interest rate is subject to change periodically. ARMs usually start off with a lower interest rate, but once that initial period ends, the interest rate on the loan can adjust and result in higher monthly payments. How long the initial interest rate will last and how often the rate will adjust depend on the mortgage. A common structure is the 5/1 ARM, where the initial period lasts five years and the interest rate adjusts once a year after that.
These mortgages are insured by the Federal Housing Administration, and allow for a down payment as low as 3.5% of the home’s purchase price. In general, FHA loans can be easier to get approved for than conventional mortgages, and they also have lower credit score requirements. However, FHA loans require borrowers to pay for upfront and annual mortgage insurance premiums. Still, for people with poor credit or smaller down payments, an FHA loan could be the cheapest choice.
Eligible service members, veterans, and their surviving spouses can get a VA loan, which is backed by the Department of Veterans Affairs. A down payment and minimum credit score aren’t necessary, but lenders may set their own credit score requirements. Instead of mortgage insurance, borrowers must pay the VA funding fee, which is a one-time payment made at closing or rolled into the loan. Compared with conventional mortgages, VA loans can wind up being more expensive for borrowers with good credit and a sizable down payment.
How To Choose a Home Loan
Once you understand the differences between each type of loan, it’s time to figure out which one best fits your financial situation and goals. These are some questions to help you get started:
- Are you seeking the most affordable monthly payment (30-year term), or can you afford to make a bigger payment each month to pay less interest overall (15-year term)?
- Do you prefer stability in your monthly payments (fixed-rate mortgage), or are you OK with the risk of rate increases in exchange for a lower interest rate to start (ARM)?
- Are you trying to refinance your existing mortgage and borrow against your equity (cash-out refinance)?
- How soon do you want to become a homeowner? What kind of down payment can you afford to make, and are you willing to pay for mortgage insurance?
Every borrower’s finances and priorities are different, so there’s no universal answer to which mortgage type is the best. It comes down to what you can qualify for and afford over the long term, and which loan offers the most benefits to you.
Once you’ve decided on your ideal mortgage, the next step is getting matched with lenders to see what kind of terms they’re willing to offer. Similar to how you compared mortgages, it’s a good idea to compare lenders.
Mortgage Comparison FAQ
Here are some frequently asked questions about comparing mortgages.
A loan comparison table breaks down the key points of different types of mortgages. Certain loans can come with a smaller monthly payment, a lower interest rate, a shorter repayment period, or less overall interest charged.
The interest rate on a mortgage is the cost you pay each year to borrow money from the lender, expressed as a percentage rate. The loan’s annual percentage rate, also known as APR, is a broader measure of the cost to borrow money. It includes the interest rate, mortgage broker fees, any discount points, and other lender fees. As a result, the APR on a mortgage is typically higher than the interest rate.
Mortgage points, also known as discount points, are upfront fees paid to the lender in exchange for a reduced interest rate and lower monthly payment. Paying points can help cut down on the total amount of interest charged for the loan, but it also increases how much you pay in closing costs.
You need to save for a 20% down payment if you want to get a conventional mortgage and avoid paying for private mortgage insurance. It’s possible for first-time homebuyers to put down as little as 3%, but the loan will come with PMI payments.
There are also mortgage options that allow qualified borrowers to make a low down payment or put zero down — like FHA, VA, and USDA loans — but they charge additional fees or mortgage insurance.
Private mortgage insurance protects the lender if you become unable to pay your mortgage. PMI is typically required when you have a conventional mortgage and make a down payment of less than 20%.
Generally, borrowers with higher credit scores can expect to receive better mortgage interest rates compared to borrowers with lower credit scores. That’s because lenders use a borrower’s credit score to evaluate how reliable they are in repaying money.
Here are some scenarios where refinancing could be worth it:
– Interest rates have dropped. If market interest rates are lower now compared with when you first took out your mortgage, refinancing to a better rate could help you save money on interest.
– You want to lower your monthly payment. You may be struggling to make your mortgage payments every month. Refinancing to a longer loan term can help lower your payments — but you’ll also pay more interest overall.
– Your credit score has increased. If you’ve improved your credit score, then you might be able to get a mortgage with better terms compared to your current loan.
– You can repay your loan sooner. By refinancing to a shorter loan term, you’ll have bigger monthly payments but pay less total interest. This option could be worth considering if your financial situation has improved and you can comfortably afford higher payments.
– You want to borrow against your equity. Cash-out refinancing typically comes with lower interest rates than credit cards and personal loans, so it could be a cheaper option if you need to borrow more money.
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