Buying a home can be a stressful and confusing process, especially when it comes to the various types of mortgage loans that are available. To help make the process smoother, we will break down the different kinds of mortgages, how to choose the right mortgage for you, and what benefits each type of loan may offer. 

Types of Mortgage Loans set of house keys laying on top of mortgage loan papers

When selecting a mortgage, you have three primary options to choose from. Fixed-rate mortgages are the most widely used type and provide consistent payments over the life of the loan. This loan has a set interest rate throughout the term of the loan—typically 15 or 30 years—and your monthly payment remains unchanged. 

An adjustable-rate mortgage (ARM) is another very popular option when it comes to financing a home. With an ARM, the interest rate changes periodically based on current market conditions, but your monthly payments remain consistent throughout the life of your loan. 

The third type is a balloon mortgage, which has a shorter fixed-term—usually five or seven years—with low monthly payments that increase significantly at the end of that period when you must pay off your entire remaining balance in one lump sum. 

How to Choose the Right Loan

Choosing the right mortgage for you depends on several factors such as your income level, credit score, and future plans for homeownership. If you plan on staying in your home for many years and want predictable monthly payments without worrying about rising interest rates then a fixed-rate mortgage may be best for you. However, if you anticipate moving within five to seven years or want lower monthly payments initially then an ARM could be better suited to meet those needs. Additionally, if you have sufficient funds saved up after five or seven years and prefer lower initial payments over long-term stability then a balloon mortgage might be worth considering. 

Pros and Cons of Each Type of Mortgage Loan Happy family in their living room with a pretend roof held over their heads

Each mortgage has its own pros and cons, so it’s important to evaluate which type of mortgage loan is best for your individual needs.


Fixed-rate mortgages provide stability and predictability by locking in an unchanging rate and payment amount for 15 or 30 years. ARMs are ideal for homeowners who expect their income levels to increase over time because they can take advantage of lower initial rates with periodic adjustments based on current market conditions—allowing them to capitalize on potential savings that become available with increasing incomes. Finally, balloon mortgages give borrowers access to more affordable initial payments with no long-term commitment; however, they come with large lump sum payments due at the end of their terms so this option should only be considered if borrowers have sufficient funds saved up by that time period in order to cover them.  


Fixed-rate mortgages can also come with a higher initial rate compared to ARMs, so if you aren’t planning on staying in your home long-term they might not be the best option. Additionally, if interest rates decrease over time, borrowers won’t benefit from that drop until their mortgage is refinanced. ARMs can have more frequent rate adjustments, which could increase your mortgage payments at any time and become difficult to predict. Finally, balloon mortgages come with larger lump sum payments due at the end of their shorter terms—which can be difficult to cover if borrowers have not saved up enough funds.

No matter which type of mortgage loan you choose, understanding all aspects before applying can help ensure that you make an informed decision and choose one that works best for your financial situation.

Union Capital Mortgage

Are you looking for the mortgage loan that’s right for you? Union Capital Mortgage can help. With mortgage options ranging from fixed-rate to adjustable-rate mortgages, there is an option to fit your financial situation and goals. Plus, our experienced mortgage advisors can break down the mortgage process and provide helpful guidance so you can make the best mortgage decision for you. Contact us today to start exploring your mortgage options!