Before we start I want to remind everyone to seek guidance from a licensed loan officer. Which I am not. Everyone’s financing circumstances are different and only you determine what is and is not right for you. Get qualified help from an expert(s) such a loan officers, tax advisors, accountants, etc.,

When it comes to securing a mortgage for your dream home, one of the most crucial decisions you’ll make is not only choosing the right home, but how to fund it. And the two types of mortgages I mostly see for residential properties is between a fixed-rate mortgage (FRM) and an adjustable-rate mortgage (ARM). As a seasoned real estate professional with years of experience helping hopeful buyers, here’s a concise yet actionable guide to help you make an informed decision:

1. Evaluate Your Financial Goals
Consider your long-term financial plans. If you prefer stability and predictable payments, a Fixed-Rate Mortgage (FRM) is the way to go. On the other hand, if you anticipate changes in your income or plan to sell the property within a few years, an Adjustable-Rate Mortgage (ARM) with its lower initial rates might be suitable (and there are different types of ARM’s available, but I’ll go deeper into that maybe in a different blog post completely dedicated to this topic).

2. Understand Rate Stability
FRMs offer constant interest rates throughout the loan term, providing financial security and ease of budgeting. ARMs, however, have fluctuating rates after an initial fixed period. Understand the potential risks involved in case of rate hikes. This could not be a more relevant time for me to speak about this, as it’s October of 2023 and I’ve seen 1/4 point rate hikes year-to-date alone.

3. Assess Your Risk Tolerance
Consider your comfort level with financial risks. ARMs offer lower initial rates, but these rates can rise, leading to higher payments. If you’re risk-averse, the predictability of an FRM might be more suitable for your peace of mind.

4. Predict Your Stay Duration
How long do you plan to stay in the home? If it’s a short-term investment, an ARM could offer lower payments during the initial years. For long-term residences, the stability of an FRM might be a safer bet.

5. Stay Informed About Market Trends
Keep an eye on market forecasts. If experts predict rising interest rates, locking in a fixed rate could save you money in the long run. Conversely, if rates are falling, an ARM might offer better savings after the initial period.

6. Know the Terms and Conditions
Understand the terms of both mortgage options thoroughly. For ARMs, be aware of rate adjustment caps, which limit how much your interest rate can increase. Knowing the index your ARM is tied to is also crucial for predicting future payments.

I know it’s a lot of pros and cons to weigh, based on your unique financial situation and goals. But this should give you a slight blueprint on helping YOU make a decision that aligns with your long-term plans.

As always, my inbox is open if you need more guidance!