Pro: Less Interest Over Time

• Generally, the shorter the loan term, the lower the interest rate. As of early 2011, 30-year mortgage rates were around 5 percent. On a $200,000 loan, an interest rate of 4 percent over five years would cost about $21,000 in interest, according to Bankrate's mortgage calculator. The same loan amount at 5 percent for 30 years would cost nearly $187,000 in interest.
  
  

Con: Higher Payment

• For that $200,000 loan, the monthly mortgage for a 30-year loan would be a little more than $1,000 a month plus taxes, insurance and any other incidentals. The same mortgage on a five-year plan would cost three times that per month. It also is possible to reduce the total interest paid by taking out a 30-year mortgage but making extra payments on the principal -- the actual loan amount -- whenever possible. That way you are not locked in to a higher monthly payment but could pay off your loan quicker, eliminating some of the interest.
  
  

Pro: No Interest Hikes

• A fixed-rate mortgage doesn't change. The interest rate and principal payment stays the same, although your total monthly payment might vary slightly if you have an escrow account for taxes and/or insurance. With an adjustable-rate mortgage, however, the interest rate goes up or down after an introductory period, typically three to five years. If interest rates rise after you take on the mortgage, the rate will readjust at the end of that period, causing a spike in your monthly payment.
  
  

Con: No Interest Reductions

• Adjustable-rate mortgages, however, can benefit the borrower. If rates drop after you take on the mortgage, your payment goes down at the end of the agreed upon period. However, with interest rates at 50-year lows, according to an economic report by Freddie Mac in August 2010, they're unlikely to drop by much for adjustable mortgages.
  
  

Pro: The House is Paid For Quickly

• For many people, the idea of being saddled with a 30- or even 15-year mortgage seems like a burden, especially given recent economic volatility. Many people today don't move into homes with the idea of living there forever. Consequently, paying off the home loan quicker means ending a drain on finances and perhaps easing the route to moving. Paying off a home can bring peace of mind and a sense of accomplishment as well.
  
  

Con: Loss of Tax Deduction

• Homeowners can claim sizable income tax deductions for mortgage interest paid each year. If you pay off a five-year loan, however, you lose that tax deduction. Investigate how much you would benefit from the mortgage deduction and whether you would be better off taking out a longer-term loan to keep that deduction in place longer.
  
  

Con: Non-traditional Loan Term

• While five-year adjustable-rate mortgages are not uncommon, five-year fixed-rate mortgages are unusual. Since many lenders sell groups of mortgages in conventional packages, they may be reluctant to take on a mortgage they can't sell because it has an unusual term, according to a 2004 Bankrate article. So you might have trouble finding a lender who will extend those terms.