If you want to own a home but don’t have the hundreds of thousands of dollars to pay for it up front, getting a mortgage is the best way to secure your goal. There are three common types of loans to choose from when considering a mortgage and fulfilling your plans for home ownership.

Fixed Rate Loans (FRL) – Fixed rate loans, as the name suggests, have a fixed interest rate applied to your loan. This means that the duration and your monthly mortgage payments are set in stone, and are predictable month to month. However, usually the interest rates for these loans are pretty high and may be more expensive than adjustable rate loans. But if interest rates ever did rise in the market over the mortgage duration, ARLs would decrease whereas FRLs would stay the same.

Adjustable Rate Loans (ARL) – Adjustable rate loans adjust their interest rate over time. The rate is set to an index which adjusts according to cost lenders have borrowing on the credit market. Usually there are boundaries set in place in order to protect you from major interest changes, such as a “cap” on the interest rate percentage itself and a max on how many times the rate can be changed within a couple of months. However, your monthly mortgage will usually change and interest risk that your lender would have in the case of an FRL is partially transferred to you through an ARL.

Hybrid Loans – Hybrids combine factors of both FRLs and ARLs. They usually start out as a fixed rate loan for the first part of the loan (usually about 10 years), then switches over to an adjustable loan over the remaining period. Usually the first (or fixed interest) portion of the hybrid loan has a lower interest rate than normal FRLs, but once the first segment of the loan is up, your rate can drastically increase. Hybrid loans may have caps like ARLs, but they usually don’t apply to your first year after the fixed term is complete.

Generally, choosing a loan type comes down to knowing how long you’d like to remain in your home and how much interest risk you are willing to take in order to secure your new home. Make sure to compare loan rates before securing a mortgage!