FAQ: Should I choose a fixed rate or adjustable rate mortgage?

There’s no one-size-fits-all answer. Choosing the right mortgage isn’t just about today’s interest rate – it’s about your plans and comfort level. Fixed rate loans offer long-term stability and predictable payments, while adjustable rate mortgages (ARMs) often start with lower rates, which can be appealing for buyers who plan to move or refinance before adjustments occur.

Although ARMs gained a negative reputation after the housing crisis, they aren’t inherently risky. In practice, rate adjustments rarely rise enough to offset the savings from lower initial rates. Understanding the specific terms of an ARM, such as the initial fixed period, adjustment caps, and index, can help you gauge potential changes and make an informed decision.

Your long-term financial goals also play an important role. How long do you plan to stay in the home? Could your income or expenses change over time? How much flexibility do you need in your budget? Answering these questions can help clarify which option best fits your situation.

For some buyers, the predictability of a fixed-rate loan is worth a slightly higher starting rate. For others, an ARM can provide meaningful short-term savings and flexibility in a changing rate environment.