Fixed vs. Adjustable Mortgage: Which Is Right for You?

Patriot Nation, one of the biggest decisions you're going to make when you get a mortgage is whether to go with a fixed rate or an adjustable rate. And most people, when they hear adjustable, they automatically think bad. But that's not always the case. There are times when an adjustable rate mortgage, or ARM, can actually be a better choice. So, today we're going to break down the differences between fixed and adjustable rate mortgages and help you figure out which one might be right for you. So, as always, let's kick off this rodeo right now. Hi folks, I'm Kevin Fagan, the mortgage patriot on your side, nestled here in the Hill Country above San Antonio, Texas, showing all you proud Texans and all you great folks all around the country another great one. So, let's get into this topic because it's one that comes up all the time. People ask me, Kevin, should I do a fixed rate or an adjustable? And my answer is always the same. It depends. It depends on your situation. It depends on how long you plan to stay in the home. It depends on your financial goals. It depends on where interest rates are. There's no one-size-fits-all answer to this question. So, let's break it down. A fixed rate mortgage is exactly what it sounds like. The rate is fixed. It doesn't change. Ever. If you lock in a 6.5% rate today, you're going to have that same 6.5% rate for the next 30 years. And that gives people peace of mind. They know exactly what their payment is going to be every single month for the next three decades. And there's something to be said for that certainty. Now, an adjustable rate mortgage works differently. The rate is fixed for an initial period, and then it adjusts. So, for example, a 5-1 ARM means your rate is fixed for five years. After those five years, the rate adjusts every year based on the market. So, your rate could go up, or it could go down. And that's the part that scares people. But here's the thing. In many cases, the initial rate on an ARM is lower than the rate on a fixed mortgage. And that lower rate can save you a significant amount of money during that initial fixed period. So, when does an ARM make sense? Well, if you know you're going to be in the home for less than five or seven years, an ARM can be a great choice. Because you're going to get a lower rate during the time you're in the home, and you're going to sell before the rate ever adjusts. So, you're essentially getting a discount on your mortgage for the entire time you own the home. That's a win. Another time an ARM makes sense is when fixed rates are really high. If fixed rates are at 7% and you can get a 5-1 ARM at 5.5%, that savings during the first five years can be substantial. And if you plan to refinance before the adjustment period, then you've saved money during the time you needed to save money. Now, when does a fixed rate make more sense? If you plan to stay in the home for a long time, 10 years or more, a fixed rate is usually the safer bet. Because you're locking in your rate and you know exactly what your payment is going to be. You don't have to worry about rates going up. You don't have to worry about refinancing. You just set it and forget it. Also, if you're on a tight budget and you can't afford a higher payment if the rate adjusts upward, then a fixed rate gives you that certainty. Here's the bottom line. Neither one is inherently better than the other. It's about matching the loan product to your specific situation and your financial goals. And that's where having a knowledgeable loan officer who will take the time to understand your needs really comes in handy. I'm the mortgage patriot, Kevin Fagan, on your side. Make it a great one. END OF TRANSCRIPT