Fixed-Rate vs. Adjustable-Rate Mortgages: Which One Fits Your Plans?
Choosing a mortgage isn't only about the interest rate you're quoted — it's also about whether that rate can change later. Fixed-rate and adjustable-rate mortgages (ARMs) handle that differently, and the right choice depends heavily on how long you expect to keep the loan. Fixed-rate mortgages A fixed-rate mortgage locks the interest rate for the entire loan term, commonly 15 or 30 years. The principal-and-interest portion of the monthly payment stays the same from the first payment to the last (property taxes and insurance held in escrow can still change). This predictability is the main appeal. Buyers who plan to stay in a home for a long time, or who simply want a payment that won't move regardless of what rates do in the broader market, tend to default to fixed-rate loans. Adjustable-rate mortgages An ARM typically starts with a lower fixed rate for an introductory period — common structures include 5/1, 7/1, or 10/1 ARMs, where the first number is the yea...