Types of Mortgage Loans

30-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 may be cheaper. 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.

20-Year Fixed Rate Mortgage
This loan is fully amortized over a 20-year period and features constant monthly payments. It offers all the advantages of the 30-year loan, plus a lower interest rate. Many borrowers opt for a 30-year fixed-rate loan and voluntarily make larger payments that will pay off your loan in 20 years. This approach combines the benefit of a shorter term with the flexibility to adjust the payment, if needed, and may provide a better alternative to committing to a higher monthly payment for the entire loan term.

15-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 combines the benefit of a shorter term with the flexibility to adjust the payment, if needed, and may provide a better alternative to committing to a higher monthly payment for the entire loan term.

10-Year Fixed Rate Mortgage
10-Year Fixed Rate Mortgage products are also available. This loan is fully amortized over a 10-year period and features constant monthly payments. It offers all of the advantages of the 30-year loan, plus a lower interest rate — and you'll own your home sooner. The disadvantage is that, with a 10-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 10 years. This approach is often safer than committing to a higher monthly payment.

FHA Fixed Rate Mortgage
(Insured by the Federal Housing Administration)
This loan is fully amortized over a 15- or 30-year period and features constant monthly payments. It offers an option with a lower down payment.

VA Fixed Rate Mortgage
(Guaranteed by the Department of Veterans Affairs, if eligible)
This loan is fully amortized over a 15- or 30-year period and features constant monthly payments. This program is for Service Members and Veterans.

Adjustable Rate Mortgage (ARM)

(5/1 ARM, 7/1 ARM and 10/1 ARM)
These ARMs — also called 5/1, 7/1 or 10/1 — can offer the best of both worlds: lower interest rates (like ARMs) and a fixed payment for a longer period of time than 1-year adjustable rate loans. For example, a "5/1 loan" has a fixed monthly payment and interest for the first five years and then the rate begins to adjust annually just as it would in a traditional adjustable-rate loan, based on then-current rates for the remaining 25 years. It's a good choice for people who expect to move (or refinance) before or shortly after the adjustment occurs.

Disclosure

  1. Commerce Bank Mortgage supports the markets and communities within our geographic regions and reserves the right to limit the geographic area in which loans will be made. Commerce lends in Missouri, Kansas, Illinois, Oklahoma and Colorado.

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