A fixed-rate mortgage buys certainty. An adjustable-rate mortgage (ARM) buys a lower starting payment in exchange for future uncertainty. Neither is universally better.
When a fixed rate makes sense
- You plan to stay 8+ years
- Your budget has little room for payment increases
- You value predictability over savings
When an ARM can be smart
- You expect to move or refinance within the initial fixed period
- You anticipate rising income
- The rate gap versus a 30-year fixed is meaningful (0.75%+)
Rule of thumb
Match the ARM’s fixed period to how long you realistically expect to own the home — then add a margin of safety.
Stress-test the worst case
Ask your lender for the maximum possible payment after the first adjustment and at the lifetime cap. If that number would keep you up at night, choose fixed.
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