Fixed-Rate Mortgage

This choice offers predictable, fixed payments over the life of the mortgage, regardless of how interest rates change in the marketplace. The principal and interest portion of your mortgage payment won't change, allowing for easier budgeting and financial planning. However, mortgage payments are usually higher than initial payments for most adjustable rate mortgages. To take advantage of an interest rate decrease, you would have to refinance.

Adjustable-Rate Mortgage (ARM)

This choice offers a lower initial interest rate and lower mortgage payments than most fixed-rate mortgages. However, interest rate and payments will adjust based on changes to a specific index, plus an additional amount, called a margin. These adjustments occur at times specified in the loan documents and can result in significant payment increases. Rate caps at each adjustment and over the life of the mortgage may offer some protection against the size of these increases. If rates drop, payments may become lower without refinancing.

Hybrid ARM

This choice offers the predictability of a fixed-rate mortgage but with a lower rate, and therefore lower payments, for an initial, specified period. The mortgage then operates as an ARM, with the interest rate and payments adjusting up and down based on a specific index, plus an additional amount, called a margin. Depending on the specific terms of the mortgage, adjustments after the fixed period may result in significant principal and interest payment increases.

Payment Option (Option ARM) Mortgage

This choice offers flexibility. For a time spelled out in your loan documents, you can choose the type of payment you make each month. There are typically four options: a payment of interest and principal that pays off the mortgage over a long term (often 30 years); a payment of interest and principal that pays off the mortgage in a shorter period (often 15 years); an interest-only payment that covers the interest but doesn't reduce the principal; or a minimum payment that does not cover interest due and increases the principal (an occurrence known as negative amortization).

Periodically, the mortgage is recast and new payment options go into effect, based on the principal owed. (These recasts are necessary because principal reduction varies based on which of the monthly payment options the borrower chooses). Making only minimum payments can trigger an early recast, prior to the scheduled recast. Recasts can result in significant payment increases. Paying only minimum payments can actually increase the amount you owe--even to the point where you may owe more than the home is worth.

Mortgage Calculator

Follow the step by step process below to compare mortgages. As you follow the steps you will be able to add features to each mortgage such as an interest only period or a temporary start rate, changes ARM margins and the choice of an index, and modify interest rate forecasts.

1. Key in the following basic information:

The home value you enter is used to estimate your monthly taxes, property insurance, and private mortgage insurance as relevant. You can modify the default values.

Mortgage amount:	$
Estimated home value:	$
Estimated taxes:	$
Estimated property insurance:	$
Estimated private mortgage insurance (PMI):	$

2. Select up to four mortgages from the categories below:

Select multiple mortgages to compare them to each other, or select a single mortgage to view a table of only that mortgage's values.

Fixed Rate	Adjustable Rate	Minimum Payment	Buydowns
30 Year Fixed-Rate	2/28 Hybrid ARM	Payment Option ARM	1% Buydown
15 Year Fixed-Rate	3/27 Hybrid ARM	Secure Payment Option ARM	2-1 Buydown
20 Year Fixed-Rate	5/25 Hybrid ARM	Fixed Rate Graduated Payment	3-2-1 Buydown
40 Year Fixed-Rate	7/23 Hybrid ARM