Business & Finance mortgage

How to Decide Between a Fixed-Rate and Adjustable-Rate Mortgage

By Business & Finance Last updated Thursday, April/18/2024

1). Know your personal comfort level. Some people want to know up front what their mortgage payment will be, regardless of how interest rates changes or how long they live in the home. Others want to capture the lowest interest rate currently available, regardless of future events.
2). Consider both types of mortgages objectively. If you're considering an ARM, what will your initial mortgage payments be, how much will the ARM change, and at what intervals? (Your lender should be able to tell you what your payment will be using various interest rates.) If you're considering a fixed-rate mortgage, are you comfortable knowing that your payment will remain constant, even if interest rates go down?
3). Take a hard look at your personal finances. What will your earnings be over the coming years? What kinds of payments will you be able to handle? Compare the potentially higher payments under the ARM with your ability to pay those rates.
4). Make a decision based on what makes the most sense for your situation.

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