Fixed versus adjustable mortgage products

[Larry Bailey]

Fixed-rate and adjustable-rate mortgages (ARMs) are two standard mortgage products.

A fixed-rate mortgage has an interest rate that stays the same for the entire loan term, usually 15 or 30 years. This gives borrowers a regular monthly payment that doesn't change, making budgeting easier.

On the other hand, an adjustable-rate mortgage has an interest rate that changes over time based on market conditions. The initial interest rate is usually lower than the interest rate on a fixed-rate mortgage, making monthly payments lower. However, this rate can change periodically, leading to potentially more significant monthly payments in the future.

When deciding between a fixed-rate and adjustable-rate mortgage, it's essential to consider your financial goals and risk tolerance. A fixed-rate mortgage may be a better choice if you value stability and predictability. If you're comfortable with some uncertainty and are willing to take on the risk of higher monthly payments in the future, an adjustable-rate mortgage may be a better fit.

It's important to carefully review the terms and conditions of both types of mortgages, including the interest rate, loan term, and any caps on how much the interest rate can change, before making a decision. Speaking with a financial advisor or mortgage professional for personalized guidance is also a good idea.