Your loan type: ARM vs. fixed rate
Adjustable-rate mortgages (ARMs), with their low initial cost, can be very tempting, while fixed-rate mortgages offer a degree of security—but at a cost.
ARM – Your interest rate may rise at the end of the adjustment period. Consider this option if you want lower monthly payments at the outset or if you want to keep your long-term options open. For example, if you move or trade up to a bigger home before the end of the adjustment period, you'll be able to benefit from the lower rate before a possible increase takes effect.
Fixed-rate mortgage – Even if market interest rates go up, your mortgage interest will remain the same for the life of the loan. This makes your monthly payments predictable. While your property taxes and home insurance may cause slight fluctuations in your monthly payment, they likely won't have the same impact as your interest rate.
Your loan term: 15- vs. 30-year
Your decision to go with either a 15- or a 30-year mortgage depends on your current financial situation and your long-term goals. It's a major decision with long-lasting effects, so consider your options carefully.
15-year mortgage – You'll have a higher monthly payment, but you'll pay less overall and be able to pay off your home more quickly.
30-year mortgage – You'll have a lower monthly payment, but over the life of the loan, you would pay more interest than with a 15-year mortgage.
The bottom line
Only you can judge which loan type and term makes the best sense for your financial situation. Crunch the numbers and carefully consider the pros and cons of an ARM versus a fixed-rate mortgage. As a general rule of thumb, opt for a 30-year mortgage unless you are fully confident in your ability to consistently make the higher payments that come with a 15-year term.
Keep it up. You're getting smarter about home buying.
How Long Does It Take to Get a Mortgage? (Article)
With the right preparation, you can have your mortgage loan in as little as one month.
What Are Points? (Article)
Learn how paying points can reduce your interest rate and monthly payment amount.
What Should I Consider Before Building a New Home? (Article)
Simplify the process by knowing what to expect before you build a home.
When Is Mortgage Insurance Required? (Article)
See why lenders require mortgage insurance and how it impacts your loan.
For comparison purposes, a 30-year fixed rate mortgage of $200,000 with a 20% down payment at an APR of 3.977% with 0.250 discount points and a $985 origination fee with a credit score of 740 would result in 360 equal payments of $940.47. This payment does not include tax or insurance costs—the total payment obligation may be higher. This is a representative example based upon rates that were effective as of 12/5/19. Rates and programs may change at any time.
For comparison purposes, a 15-year fixed rate mortgage of $200,000 with a 20% down payment at an APR of 3.430% with 0.250 discount points and a $985 origination fee with a credit score of 740 would result 180 equal payments of $1,405.34. This payment does not include tax or insurance costs—the total payment obligation may be higher. This is a representative example based upon rates that were effective as of 12/5/19. Rates and programs may change at any time.
Loans, lines of credit and credit cards are subject to credit approval.
All BB&T mortgage professionals are registered on the Nationwide Mortgage Licensing System & Registry (NMLS), which promotes uniformity and transparency throughout the residential real estate industry. Search the NMLS Registry.
Consumer Handbook on Adjustable-Rate Mortgages coming soon.
Truist Bank, Member FDIC and an Equal Housing Lender.
By clicking any of these related links, you will leave BBT.com to visit a third-party website where the privacy and security policies of BB&T do not apply. BB&T is not responsible for the content, products or services that you may find there.
New York City residents: Translation or other language access services may be available. When calling our office regarding collection activity, if you speak a language other than English and need verbal translation services, be sure to inform the representative. A description and translation of commonly-used debt collection terms is available in multiple languages at www.nyc.gov/dca.
Branch Banking and Trust Company is now Truist Bank. Learn more.
BB&T and SunTrust have merged to become Truist. Both institutions will continue to offer independent product lines for a period of time. This may include differing underwriting guidelines, product features, terms, fees and pricing. Our friendly teammates at your local SunTrust branches will be happy to walk you through their respective products. You can also learn more by contacting them at 800-SUNTRUST or SunTrust.com.