Fixed vs Adjustable Mortgage Rates: Which Is Right for You?
When shopping for a home loan, one of the first decisions you’ll face is choosing between a fixed rate mortgage and an adjustable-rate mortgage (ARM). While both options have their pros and cons, the right choice depends on your financial goals, how long you plan to stay in the home, and your tolerance for risk.
Let’s break down the key differences, benefits and drawbacks to help you make an informed decision.
What Is a Fixed Rate Mortgage?
A fixed rate mortgage has an interest rate that remains the same throughout the entire loan term. This means your monthly principal and interest payments stay consistent, making it easier to budget long term.
Key Features:
- Predictable monthly payments
- Loan terms typically 15, 20, or 30 years
- Best for long term homeowners
Pros:
- Rate won’t change even if market rates rise
- Simpler to understand and manage
- Good for budgeting and financial planning
Cons:
- Higher starting rate than ARMs
- Less flexibility if you plan to move or refinance soon
What Is an Adjustable Rate Mortgage (ARM)?
An adjustable rate mortgage starts with a lower introductory interest rate that remains fixed for an initial period (usually 5, 7, or 10 years), after which the rate adjusts annually based on market conditions.
Key Features:
- Lower initial rate than fixed mortgages
- Rate adjusts after the intro period (e.g., a 5/1 ARM adjusts annually after 5 years)
- Rate caps limit how much the rate can increase per year and over the life of the loan
Pros:
- Lower initial monthly payments
- Ideal if you plan to move or refinance within a few years
- Potential to save money early in the loan
Cons:
- Rates (and payments) can increase significantly after the intro period
- Harder to budget long term
- Not ideal in a rising rate environment
Fixed vs ARM Mortgage Rates Comparison
| Feature | Fixed-Rate Mortgage | Adjustable-Rate Mortgage (ARM) |
|---|---|---|
| Initial Rate | Higher | Lower |
| Rate Stability | Stays the same | Changes after intro period |
| Payment Predictability | Very predictable | Can fluctuate |
| Best For | Long-term homeowners | Short-term plans (move/refi) |
| Risk Level | Low | Moderate to high |
Choosing between a fixed rate and an adjustable rate mortgage depends on your unique situation. At Alpine Mortgage, we help you weigh the pros and cons and find the loan that fits your lifestyle and goals. Alpine Mortgage maintains a team of highly skilled industry professionals familiar with the company’s fixed and adjustable rate products.
Call us today at (800) 876-LOAN to speak with one of our mortgage specialists or click here to have one of our specialists contact you.
If you are interested in applying for a fixed or adjustable rate mortgage, you can apply online now.
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