Explore the differences between fixed-rate mortgages and ARMs to determine which loan type best suits your financial goals and housing plans.
When it comes to choosing a mortgage, homeowners have a variety of options. Two of the most common types are Fixed-Rate Mortgages and Adjustable-Rate Mortgages (ARMs). Each type offers its own set of benefits and considerations, depending on your financial situation and long-term goals.
A Fixed-Rate Mortgage locks in your interest rate for the entire term of the loan, which can range from 10 to 30 years. This stability means your monthly principal and interest payments remain the same, making it easier to budget. Fixed-rate loans are ideal for those who plan on staying in their home for many years and prefer the predictability of consistent payments, regardless of market fluctuations.
On the other hand, ARMs start with a lower interest rate compared to fixed-rate mortgages, making them attractive for short-term savings. However, after a set period, the interest rate adjusts at regular intervals based on market trends. This means your monthly payments could increase or decrease. ARMs are suitable for those who plan to sell or refinance before the rate adjusts, or who can afford higher future payments if interest rates rise.
