Thirty-Year Fixed Rate Mortgage
The traditional 30-year fixed-rate mortgage has a constant interest rate and monthly payments that never change. This may be a good choice if you plan to stay in your home for seven years or longer. If you plan to move within seven years, then adjustable-rate loans are usually cheaper. As a rule of thumb, it may be harder to qualify for fixed-rate loans than for adjustable rate loans. When interest rates are low, fixed-rate loans are generally not that much more expensive than adjustable-rate mortgages and may be a better deal in the long run, because you can lock in the rate for the life of your loan.
Fifteen-Year Fixed Rate Mortgage
This loan is fully amortized over a 15-year period and features constant monthly payments. It offers all the advantages of the 30-year loan, plus a lower interest rate—and you'll own your home twice as fast. The disadvantage is that, with a 15-year loan, you commit to a higher monthly payment. Many borrowers opt for a 30-year fixed-rate loan and voluntarily make larger payments that will pay off their loan in 15 years. This approach is often safer than committing to a higher monthly payment, since the difference in interest rates isn't that great.
Home Equity Loan
Home equity loans allow you to borrow against the value of your home. These loans are often attractive because you can borrow relatively large amounts of money, and they’re easier to qualify for other loans because they are secured by your house. If your home is worth more than you owe on it, a home equity loan may provide funds for anything you want (you don’t just have to use it on home expenses, for example).
A home equity loan is a type of second mortgage. Your “first” mortgage is the one you used to purchase your home, but you can add other loans to borrow against the property if you have built up equity.
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