Borrowers Must Make an Informed Choice When Choosing Their Mortgage Loan

Don't end up taking out a mortgage loan that you regret.

In recent months, mortgage rates have been quickly rising -- and it's possible that the interest rate on a 30-year loan could soon hit 5.00%. With rates going up, borrowers need to be sure they carefully research loan options to select a loan that's right for them.

Here's what average rates look like on April 5, 2022:

Data source: The Ascent's national mortgage interest rate tracking.

30-year mortgage rates

The average 30-year mortgage rate today is 4.837%. Although this rate is above the average rate other loans offer, including the 5/1 ARM as well as loans with shorter payoff times, this mortgage comes with consistent monthly payments that are more affordable than those on shorter-term loans. It could be the best option if you're willing to pay more over time in exchange for a lower monthly payment.

20-year mortgage rates

The average 20-year mortgage rate today is 4.488%. The interest rate is lower than on the 30-year loan, but monthly payments are higher because of the shortened payoff time. If you're considering choosing this loan option to save over the life of the loan, be sure you can afford the monthly payment.

15-year mortgage rates

The average 15-year mortgage rate today is 3.976%. Again, while the rate is lower than on longer-term loans, monthly payments will be considerably higher due to the reduced payoff time. Although you may be tempted to choose this loan because of the low rate, be sure that doing so wouldn't make it too difficult for you to afford your monthly costs.

5/1 ARMs

The average 5/1 ARM rate is 3.819%. Since the rate on this loan type is lower than the 30-year fixed-rate loan, an ARM can seem tempting. However, you need to remember that his rate is locked in for just five years. After that time it could adjust up and you could end up paying much more each month and over time.

Which mortgage is right for you?

While it's tempting to look for the lowest possible rate, you need to look at the big picture including the payoff time, monthly payment, and whether your rates could change. This will help you to pick the best mortgage for you. It's also more important than ever to comparison shop for different loans among the best mortgage lenders since you can't afford to pay more than necessary during this time of rising rates.