Fixed-rate fully amortizing loans are the most popular type of mortgage loan, as they offer a monthly payment that does not change over time and result in a portion of the loan’s principal being paid down every month.

Many borrowers find fixed-rate home loans to be an appropriate mortgage for their needs. Most fixed-rate mortgages are for loan terms of 15 or 30-years.* 

A 30-year amortizing loan typically has lower payments than a 15-year loan, but a slightly higher interest rate than a 15-year loan.*

An adjustable-rate mortgage has a short-term fixed-rate term during which an interest rate is fixed.* After this initial term, the interest rate on an adjustable-rate mortgage or “ARM” loan can change periodically at certain intervals.* This adjustment permits the lender to adjust the interest rate to match changing interest rate environments.* 

For example, a 3/1 ARM loan offers a fixed-rate for the first three years, adjusting once a year thereafter.* A 5/1 ARM loan offers a fixed-rate for the first five years, adjusting yearly thereafter.* At each adjustment, the lender sets the interest rate by adding a margin or spread to the then-current index rate.