When choosing a mortgage, one of the first decisions is fixed versus adjustable rate. Each has trade-offs, and the right choice depends on how long you plan to stay and your tolerance for payment changes.
Fixed-Rate Mortgages
A fixed-rate mortgage locks in your interest rate for the entire loan term. Your principal-and-interest payment never changes, which makes budgeting easy and protects you from rising rates. The trade-off is that fixed rates typically start slightly higher than adjustable rates.
Adjustable-Rate Mortgages (ARMs)
An ARM has a fixed rate for an initial period (often 5, 7, or 10 years), then adjusts periodically based on market indexes. The initial rate is usually lower than a fixed rate, which can mean big savings — but after the fixed period, your rate and payment can rise.
- •Choose fixed if you plan to stay long-term and value predictability.
- •Choose an ARM if you'll move or refinance before the rate adjusts.
- •ARMs can offer lower initial payments but carry future rate risk.
The best loan isn't the one with the lowest rate today — it's the one that matches how long you'll actually keep it.
How to Decide
Think about your timeline. If you're confident you'll sell or refinance within the ARM's fixed period, the savings can be worth it. If you're settling in for the long haul, the stability of a fixed rate usually wins. We'll model both scenarios with your numbers so the choice is clear.
