When shopping for a mortgage, one of the biggest decisions you'll face is choosing between a Fixed-Rate Mortgage (FRM) and an Adjustable-Rate Mortgage (ARM). Both options have their pros and cons, and understanding them can help you make the best decision for your financial situation.
Fixed-Rate Mortgages
A fixed-rate mortgage has an interest rate that remains constant throughout the life of the loan. Here's what you need to know:
Stability: Your monthly payments stay the same, making it easier to budget.
Long-Term Savings: You’re protected from future interest rate increases.
Adjustable-Rate Mortgages
An adjustable-rate mortgage has an interest rate that can change after an initial fixed period. For example, a 5/1 ARM has a fixed rate for five years, then adjusts annually. Key features include:
Rate Adjustments: After the fixed period, your rate can increase or decrease based on market conditions.
Risk of Higher Costs: If rates rise, your monthly payments could go up significantly.
Which One Should You Choose?
If you plan to stay in your home for a long time or prefer predictable payments, a fixed-rate mortgage may be the better choice.
If you expect to move or refinance before the fixed period ends, an ARM could save you money in the short term.
Still unsure? Reach out to us for personalized guidance—we’ll help you weigh your options and find the loan that fits your needs!