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There are many types of mortgage loans available for many different buying scenarios. Selecting the type of mortgage that is right for you is something you should do with your mortgage professional. However, the major types of mortgage loans include:

• Fixed-Rate Mortgage: Because they offer a monthly payment that does not change, fixed-rate mortgage loans are the most popular type.
  
  Most fixed-rate mortgages are for loan terms of 15 or 30-years. A 30-year loan has lower payments but a slightly higher interest rate. To pay off a fixed-rate loan sooner, check with your lender to make sure you can make prepayments. You should be allowed to make these anytime and for any amount, and at no penalty.
  
  
• Adjustable-Rate Mortgage (ARM): After an initial term, the interest rate on an adjustable-rate mortgage (ARM) is periodically adjusted to keep the rate in line with current market rates. 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. The lender sets the interest rate by adding a margin to an index rate.
  
  Most ARMs have a periodic rate cap and lifetime cap to limit the amount the interest rate can increase each adjustment period and over the term of the loan, respectively. If you have a payment cap in your loan agreement, you may face negative amortization of your loan. This has the effect of increasing the amount you owe.
  
  
• Convertible Mortgage: These are ARM loans that allow you to convert to a fixed-rate loan at or before a specified time. The conversion privilege lets you start off with a low variable rate, and then lock in a rate when fixed rates drop low enough.
  
  
• Balloon Mortgage: These loans often have interest-only payments. In this case, you don't amortize any loan principal and the entire loan amount is due at the end of the loan term. This type of mortgage allows you to minimize monthly payments until you refinance. Another advantage is that a larger share of your payment may be eligible for the mortgage interest tax deduction.