The life, or term, of a mortgage is 30 years by industry standards, but 15 and 20 year term loans are also available.  A 15 year rate is typically one-quarter to one-half percent lower than one for 30 years.  The smaller rate and shorter term mean you'll pay less over the life of the loan than if you borrowed the same amount over a longer term.

When you choose a fixed rate mortgage, you're assured your interest rate will remain the same for the life of the loan.  Fixed-rate mortgages protect you from the risk of rising interest rates.  But you could end up with a higher rate should the interest rate fall.

The second major mortgage category is the adjustable rate, or ARM.  Initially, an ARM rate is lower than one that is fixed, about one-quarter to two points less, depending on the economy.  With its lower preliminary rate, ARMs can help you qualify for a larger loan or start off with smaller payments than with a higher fixed rate.  ARMs have caps on how high it can adjust during each adjustment period and over the life of the loan, but don't offer the stability of a fixed rate loan.  If you plan to move in a few years and aren't concerned about the possibility of a higher rate, an ARM could be a good choice.  When the first adjustment occurs (usually between 6 and 12 months) and how often it adjusts depends upon the terms of the loan.  After the first adjustment, subsequent modifications can occur every six months, once a year or longer.  Should rates fall, so does your monthly payment.