Choosing a Loan

When refinancing, you may not want to go with the same type of loan you currently have. It’s important to understand the different mortgage loan options and the benefits of each. Most loans fall into one of two categories—fixed rate and adjustable rate.

Some things to consider when choosing a loan include:

  • How long you plan to stay in your home.

    If you think you’ll stay put for more than seven years, then a fixed-rate option is the way to go. But if you have thoughts of moving before then, an adjustable-rate mortgage may have some draws.

  • The current interest rates.

    The difference in the monthly loan payment for a fixed-rate vs. an adjustable-rate loan will vary depending on this rate.

  • The term you want.

    Most mortgages are 30-year loans, and sticking with that may mean a lower monthly payment. But a shorter term loan (15 years, for example) may offer a lower interest rate and help you pay it off faster.

  • Paying for points.

    If you are planning to stay in your home for a longer period of time, you may want to consider lowering your interest rate by paying for discount points. Each point costs 1% of your loan amount and can decrease your interest rate by around 0.25%. Check out our Points Calculator to help make this decision.