Fixed Rate vs Adjustable Rate Mortgage
by Anonymous
Fixed-rate mortgages lock in today's 6.48% average rate for 30 years, protecting against rate increases but missing potential savings if rates fall. Adjustable-rate mortgages (ARMs) start 0.5-1% lower with a fixed period of 5-10 years before adjusting annually. ARMs make sense for buyers planning to sell or refinance within the initial fixed period.
Fixed Rate Mortgage
6.48% (30-year)
current average rate
100% predictable
payment predictability
None
rate change risk
~$2,525
initial monthly payment ($400k)
Long-term homeowners
best for
Adjustable Rate Mortgage
5.8-6.0% (5/1 ARM)
current average rate
Fixed for 5-10 years, then variable
payment predictability
Can increase up to 5% over life
rate change risk
~$2,350
initial monthly payment ($400k)
Short-term owners, rate-drop bettors
best for
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