Mortgage Question #7: Which is better — a fixed or adjustable rate mortgage?
It depends. Because interest rates and mortgage options change often, your choice of a fixed or adjustable rate mortgage should depend on: • the interest rates and mortgage options available when you’re buying a house • your view of the future (generally, high inflation will mean ARM rates will go up and lower inflation means that they will fall), and • how willing you are to take a risk. When mortgage rates are low, a fixed rate mortgage is the best bet for most buyers. Over the next five, ten or thirty years, interest rates are more apt to go up than further down. Even if rates could go a little lower in the short run, an ARM’s teaser rate will adjust up soon and you won’t gain much if you plan to stay in the house more than a few years (the broker can tell you your break-even point). In the long run, ARMs are likely to go up, meaning most buyers will be best off to lock in a favorable fixed rate now and not take the risk of much higher rates later. Keep in mind that a lender not onl
