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Different Types of Mortgage Loans
7 Min Read | Last updated: July 10, 2026
This article contains general information and is not intended to provide information that is specific to American Express products and services. Similar products and services offered by different companies will have different features and you should always read about product details before acquiring any financial product.
Explore the different types of mortgage loans, including fixed-rate mortgages and adjustable-rate mortgages, and learn how to choose the right option for you.
At-A-Glance
- There are many different types of mortgages to choose from, including fixed-rate mortgages, ARMs, government-backed loans, and jumbo loans. Which one you pick may depend on your eligibility, housing preference, and financial profile.
- You may want to choose a longer-term loan to spread your costs over a longer period of time. If you don’t want to pay as much in interest, you may prefer a shorter-term loan.
- After you’ve built up equity in your home, you may decide to take out a second mortgage or refinance your home.
Mortgages come in more shapes and sizes than you might imagine, and finding the right one for your financial future can be challenging if you don’t know your options. Understanding the different types of mortgage loans available can help you buy the house you want — and potentially save money in the process.
The Two Main Types of Mortgage Loans Have Many Variations
One way to categorize different types of mortgages is by how they accrue interest. Two overarching types are:
- Fixed-rate
Most homebuyers take out fixed-rate mortgages for 30- or 15-year terms. With a fixed-rate mortgage, borrowers make regular monthly principal-and-interest payments that don’t vary over the life of the loan. - Adjustable-rate
There are several kinds of adjustable-rate mortgages (ARMs), too, where your interest rate and monthly payments usually change over time.
Each of these two main mortgage categories has many variations depending on who’s backing the loan — a lender or a government agency — how big it is, whether it’s for a first-time homebuyer, whether it’s in an urban or rural area, and other factors. The variety of interest and down payment options adds up to a wide array of mortgage types with specific terms and acronyms. For example, there are:
- Jumbo loans
- Two-step mortgages
- Balloon mortgages
- Bridge loans
And in addition to loans backed by private lenders, depending on your circumstances, you may qualify for mortgages backed by the:
- Federal Housing Administration (FHA)
- Veterans Administration (VA)
- U.S. Department of Agriculture (USDA)
Another category of mortgages is for accessing cash rather than buying a house, including refinancings, second mortgages, and reverse mortgages.
Below is a deeper dive into these various types of mortgages.
Fixed Mortgages: 30-Year Versus 15-Year
Many homebuyers choose fixed-rate mortgages because of their predictability. Fixed-rate mortgages are available at different institutions and at different interest rates, but they typically have this in common: The shorter the term of your mortgage, in years, the higher your monthly payment — and the lower your total cost over the life of the loan.1
So, it’s not surprising that the two main fixed-rate mortgage options differ by term. The interest rate on a 15-year mortgage is usually a bit lower than a 30-year mortgage.2 The advantage of the 15-year is that you’re paying the principal amount that you owe on the house faster, with less time to accrue interest that gets added on over the course of a longer-term mortgage.
| Shorter term | Longer term |
|---|---|
| Higher monthly payments | Lower monthly payments |
| Sometimes lower interest rates | Sometimes higher interest rates |
| Lower total cost | Higher total cost |
Pros and Cons of 30-Year and 15-Year Mortgages
Your loan term preference may depend on how you want to manage your loan over time. A 30-year loan may help some borrowers afford a larger home than a 15-year loan, for example, by spreading the cost out more. Or, the lower monthly payments on a 30-year loan might fit their budget better. You can always choose to accelerate your payments on your own, and if you plan on moving in a few years, the added interest you accrue with a 30-year mortgage may not play a significant factor.
On the other hand, a 15-year mortgage’s lower interest rate and faster repayment term may save you thousands of dollars over time. And, by helping you to pay off your house in half the time, a 15-year mortgage may allow you to put your money toward another financial goal much sooner. Keep in mind that to qualify for either term length, you typically need to make a down payment of 20% to avoid paying private mortgage insurance (PMI).3
Adjustable-Rate Mortgages Explained
Although many borrowers prefer the predictability of fixed-rate mortgages, some borrowers opt for an ARM. ARMs may carry a fixed interest rate for a specified number of years, after which your rate can go up or down depending on economic conditions — and your monthly payment with it. Some types of ARMs include:
- A 5/1 ARM
Your rate is fixed for the first five years, after which it resets every year. - A 10/5 ARM
Your rate is fixed for the first 10 years, after which it resets every five years.
ARMs’ introductory interest rates are typically lower than those of fixed-rate loans.4 Before the fixed-rate period of an ARM ends, many borrowers may decide to sell their home or refinance to a fixed-rate mortgage. Keep in mind that if you plan to refinance your ARM into a fixed-rate mortgage, you’ll have to pay closing costs, which can be substantial. You may want to weigh refinancing closing costs with the potential of higher mortgage payments due to variable interest rates.
Other Types of Mortgages to Match Different Needs
Under the umbrella of basic fixed-rate or ARMs, you can find a host of other mortgage types in the market. These include:
Conventional loans: When a mortgage is conventional, it means it’s not sponsored by the government. Conventional loans that conform to the Federal Housing Finance Agency's standards are eligible for purchase by government-sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac. Because GSEs can purchase them, conforming conventional loans provide additional security for lenders.
FHA, VA, and USDA loans: The FHA sponsors some loans with more flexible borrowing requirements, like less favorable credit scores and smaller down payments, than conventional mortgages.5 However, they also may require you to pay mortgage insurance premiums for the duration of the loan.6 Loans sponsored by the VA and the USDA offer more flexible mortgage terms as well, for qualifying veterans and rural residents, respectively.
Jumbo loans: Some higher-value, non-conforming conventional loans may not be eligible for purchase by GSEs like Fannie Mae and Freddie Mac, and these loans are referred to as jumbo loans. Since jumbo loans are typically worth more, and the lender doesn’t have the security of potentially selling the loan to a GSE, you may need excellent credit, substantial cash reserves and a low debt-to-income (DTI) ratio to qualify.7
Bridge loans: A bridge loan might help you purchase a new home while you’re still waiting to sell the one you’re in.
Bridge Loan Calculator 
Use this tool to help estimate the total potential cost of a bridge loan - including interest, fees, and the loan amount.
Use this tool to help estimate the total potential cost of a bridge loan - including interest, fees,
and the loan amount.
Try Entering Different Terms
Based on what you entered, you'd be looking to borrow 85% of the property's purchase price - which is above the usual loan-to-value (LTV) limit. Lenders typically only allow borrowing up to 80%, so you'd need to contribute at least 20% through equity or cash.
Additional financial qualifications may apply and will vary depending on the lender.
Your Results
Here's what a loan might look like with those terms.
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Secured Amount
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Net loan amount
$0
Total fees
$0
Gross loan amount
$0
Estimated monthly payment
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Total interest amount
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Total amount to pay
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This calculator is intended for illustrative purposes only and is not intended to offer any tax, legal, financial or investment advice. The terms and conditions of loans will vary by lender and may include additional fees or other terms that the calculator does not contemplate. If you have questions, please consult your own professional legal, tax and financial advisors.
Actual interest earned will vary, depending on your financial institution and their method of calculating interest.
Actual interest earned will vary, depending on your financial institution and their method of calculating interest.
Refinancing, Second Mortgages, and Reverse Mortgages
After you’ve locked in your primary mortgage, you open up a world of flexibility based on your home’s equity. Some borrowers may choose to refinance their home down the line for a better rate, or tap into their home’s equity for more liquidity. A few different ways borrowers may be able to use their mortgage include:
- Refinancing
Some people refinance to get a better loan term and interest rate, in what’s a called a rate-and-term refinance. Alternatively, some borrowers may opt for a “cash-out refinance,” which allows you to receive some of your home’s equity as cash, replacing your current mortgage with one with a higher balance in exchange. If you’re wondering when to refinance, consider that it may come with significant closing costs, so make sure your new rate will save you money over time. - Second Mortgage
Like cash-out refinances, second mortgages allow borrowers to tap into the equity they’ve built in their home to take out a second loan with their home as collateral. Common types include home equity loans and home equity lines of credit (HELOCs), which are often used to finance home renovations. When they’re opened at the same time as a primary mortgage, they may be referred to as a “piggyback loan” and used to pay PMI. - Reverse Mortgage
Some homeowners age 62 or older are eligible to take out a Home Equity Conversion Mortgage (HECM), the most common type of reverse mortgage.8 Reverse mortgages also use the home as collateral for a loan, but instead of paying off the mortgage over time, the loan balance grows with interest and fees. These loans must be paid back when the home is sold or the borrower passes away.9
Frequently Asked Questions
Fixed-rate mortgages offer more predictability, and if mortgage rates rise over time, then locking into a lower fixed rate may benefit borrowers. ARMs may offer lower introductory rates, but if rates rise after the introductory period, borrowers may have to pay more over time.
Whether you prefer a shorter- or longer-term mortgage depends on how you want to manage your mortgage payments. Shorter-term mortgages usually have lower interest rates, but since they’re spread over less time, they may have higher monthly payments. Longer-term mortgages may have higher interest rates, so you could pay more over the life of the loan, but since payments are spread out over a longer timeframe, you may have a lower monthly payment.
Government-sponsored mortgages like FHA loans may have more flexible borrowing requirements, which make them an attractive option for borrowers with less favorable credit or less cash on hand to make a larger down payment. However, they also require borrowers to pay mortgage insurance premiums (MIPs). If a borrower can make a large enough down payment to avoid paying mortgage insurance, a conventional mortgage may be a more suitable option.
The Takeaway
Buying a house usually means taking out a mortgage. To make this complex transaction as smooth and successful as possible, it’s a good idea to brush up on the many types of mortgages available today. A little knowledge could help you get the house you want while paying the lowest possible financing costs.
1,2 “Understand the different kinds of loans available,” Consumer Financial Protection Bureau
4 “What Is an Adjustable-Rate Mortgage?,” Experian
5,6 “What Is an FHA Loan?,” Experian
3,7 “What Is a Jumbo Loan?,” Experian
8,9 “What is a reverse mortgage?,” Consumer Financial Protection Bureau
Karen Lynch is a journalist who has covered global business, technology, finance, and related public policy issues for more than 30 years.
All Credit Intel content is written by freelance authors and commissioned and paid for by American Express.
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