Choosing a mortgage is one of the most important financial decisions you'll make when buying a home. Two of the most common types are fixed-rate mortgages and adjustable-rate mortgages (ARMs). Each comes with its own set of benefits and trade-offs. Knowing how they work can help you choose the one that fits your financial goals.
Fixed-Rate Mortgages
With a fixed-rate mortgage, your interest rate stays the same for the entire life of the loan. This means your monthly principal and interest payments won’t change.
Pros:
- Predictable monthly payments
- Easier to budget long-term
- Protection from future interest rate increases
Cons:
- Initial interest rates are typically higher than ARMs
- May cost more in interest over the life of the loan if you don’t stay in the home long-term
- As of summer 2024, the average 30-year fixed mortgage rate was around 6.5%. While this may seem high to some buyers, it offers consistency and financial peace of mind.
Adjustable-Rate Mortgages (ARMs)
An ARM starts with a lower interest rate than a fixed-rate mortgage. However, after an initial period (typically 3, 5, 7, or 10 years), the interest rate adjusts based on market conditions. This can lead to either higher or lower monthly payments over time.
Pros:
- Lower initial interest rate
- Potential to save money if you sell or refinance before the rate adjusts
- May be a good option if you don’t plan to stay in the home long-term
Cons:
- Payments can increase over time
- Less predictable than fixed-rate mortgages
- Could cost more if interest rates rise significantly
Which One Should You Choose?
There’s no universal answer. Your choice depends on your current finances, long-term plans, and comfort with possible rate changes.
A fixed-rate mortgage may be better if:
- You want predictable payments
- You plan to stay in your home for many years
- You prefer long-term financial stability
An ARM might make sense if:
- You expect to move or refinance within a few years
- You want to take advantage of a lower starting rate
- You’re comfortable with future rate changes
Making the Right Decision
Before choosing a mortgage, take the time to:
- Use a mortgage calculator to estimate your payments
- Talk to a licensed mortgage advisor to understand your options
- Review loan terms carefully and ask questions about anything unclear
Now Is a Smart Time to Consider Buying
Even with current rates, homeownership continues to offer long-term value. Fixed and adjustable-rate mortgages can both be good options — what matters most is choosing the one that works for you. If you’re ready to explore your loan choices or need help deciding what’s right for your situation, I’m here to help.
Ready to take the next step in your home-buying journey? Contact me today to find the right mortgage for your budget and plans.