Understanding Mortgage Rates: Fixed vs. ARM
Compare fixed-rate and adjustable-rate mortgages to make the best decision for your home purchase.
Finmato Team
Financial Specialist
Choosing between a fixed-rate mortgage and an adjustable-rate mortgage (ARM) is one of the biggest decisions in home buying.
The Stability of Fixed-Rate Mortgages
A fixed-rate mortgage is the most common home loan. Your interest rate remains the same for the entire life of the loan (usually 15 or 30 years).
Predictability
Your monthly principal and interest payments never change.
Inflation Protection
If interest rates rise in the future, your low rate is locked in.
The Flexibility of ARMs
An Adjustable-Rate Mortgage (ARM) usually offers a lower initial interest rate than a fixed-rate loan for a set period (like 5 or 7 years). After that, the rate fluctuates based on market indices.
How it adjusts
ARMs are indexed to specific rates like the SOFR. Caps are placed on how much the rate can increase per year and over the life of the loan.