ARM vs Fixed Interest Rate: What to Choose?
You may want an ARM in the following cases:
- Not Long-Term: If you don’t intend to stay in your property for long term, you may take advantage of the low initial interest rate and sell before the rate rises to a possibly higher level.
- Expect to Earn More: A changing interest rate is excellent for borrowers who are financially prepared to absorb the increase in expenditures. If you believe your salary will increase over the following few years, your bank account may be able to afford an ARM.
You may prefer a fixed-rate mortgage in the following cases:
- You’re Purchasing Your Lifelong Home: For borrowers considering a long-term home purchase, changing interest rates may not be the best option. If you want to live in your home for many years, a fixed-rate mortgage may be a preferable option since it is stable and constant.
- You Follow a Rigid Budget: Fixed-rate loans require you to pay the same amount every month, so you understand exactly what you’re accountable for. If your budget is limited, ARMs may be too expensive, even if the transition is only a few years away.