One of the most important decisions you'll make when getting a mortgage is choosing between a fixed-rate and adjustable-rate mortgage. Each has advantages and disadvantages.
Fixed-Rate Mortgage (FRM)
The interest rate stays the same for the entire loan term.
Pros:
- Predictable monthly payments
- Protection against rate increases
- Easier budgeting
Cons:
- Higher initial rate than ARMs
- Don't benefit if rates fall
Adjustable-Rate Mortgage (ARM)
The rate changes periodically based on market conditions.
Pros:
- Lower initial rate
- Save money if rates stay low
- Good for short-term ownership
Cons:
- Payments can increase significantly
- Uncertainty over future costs
- Complex terms to understand
Which Should You Choose?
Choose Fixed If: You plan to stay long-term, want stability, or rates are historically low.
Choose Adjustable If: You plan to move in 5-7 years, expect income to grow, or need a lower initial payment.