Fixed Rate vs. Adjustable-Rate Mortgage
Predictability vs. initial rate savings. Choosing between a fixed-rate mortgage and an ARM involves more than comparing today's payment.
30-Year Fixed Rate
Your interest rate remains fixed for the life of the loan, providing predictable principal and interest payments and protection from future interest-rate increases.
Adjustable-Rate Mortgage (ARM)
An ARM typically begins with a fixed-rate period. After that initial period, the rate may adjust periodically based on the loan's terms and a specified index and margin. Adjustment caps limit how much the rate can change at each adjustment and over the life of the loan.
Why Does It Matter?
An ARM may offer a lower initial rate than a comparable fixed-rate mortgage, but future payments can change after the initial fixed period.
Consider how long you expect to keep the mortgage, your financial flexibility, and the ARM's initial period, adjustment frequency, index, margin, and caps before making a decision.
This information is provided for general educational purposes only and is not a commitment to lend, an offer of credit, or individualized financial advice. Loan programs, eligibility requirements, interest rates, terms, fees, mortgage insurance, and guidelines are subject to change and may vary by borrower, property, lender, and loan program. All loans are subject to applicable underwriting, credit, income, asset, and property requirements.