There are so many decisions to make when it comes to buying a home: finding just the right home for you and your family or design choices for your new construction. Then add the mortgage process to it, and you’ve got even more decisions to make.

Selecting the right mortgage term is important.  It affects your rate and your payment.  Here’s some information on different terms to help with the process.

30 Year Fixed
This term is for borrowers with a long term ownership goal who need the lowest possible payment.  For example, a $200,000 mortgage loan payment plus interest at 4.5% would be about $1,014 per month. Total of payments is about $365,000. So you pay $165,000 in interest over 30 years.

15 Year Fixed
Also for borrowers with a long term ownership goal but who want to minimize their interest paid over time and to pay their home off sooner.  For a $200,000 loan, the payment plus interest at 3.75% would be about $1,455 per month. Total of payments is about $261,900. So you pay $61,900 in interest over the 15 years, saving over $103,000 versus the 30 year loan at a slightly higher rate.

5 Year Adjustable Rate Mortgage (ARM)
This much talked about term is for borrowers with short term ownership goals, who relocate often, or who just want a starter home with the idea of stepping up to a nicer home in 3-5 years.  For a $200,000 loan the payment plus interest at 3.5% is about $899 per month. The total of payments over the 5 year period is $53,940 as compared to the payments over the first 5 years of the 30 year fixed loan of $60,840…a savings of $6900 over the 5 year period. For borrowers that know they will not still be in the home 5+ years from now, it is a good option.

*Totals and rates are for example purposes only.