Now that you've read about the individual comparison's, let's take a look at fixed-rate mortgages vs ARMs head-to-head.
Even before looking at these charts, you should first take a look at the current mortgage rates as that will be one of the biggest indicators on which loan to go with. It also wouldn't hurt to do some more research on the current market to get a feel for where rates are headed. Obviously nobody knows for sure, but forecasting interest rates, at least in the near future, is fairly predictable.
Advantages|
- When rates are low it's hard to beat a fixed-rate mortgage.
- You won't have to worry about your monthly payments going up and down which can help to relieve extra stress.
- Fixed-rate mortgages are usually pretty simple and straight forward without much room to slip in extra terms that can confuse you.
| - If rates do go lower, you take advantage of those rates without the extra cost and hassle of refinancing.
- You can capitalize on flexible terms and lower fixed-rates early in the loan, (teaser rates) especially if you don't plan on being in the house very long.
- There are different options and "hybrids" that you can play with if you feel that you really know what you're doing.
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Disadvantages|
- If rates do go down, you'd have to refinance to take advantage of the lower rate, but that can cost thousands of dollars so it would have to be a big drop to become feasible.
- There really isn't much room to negotiate and play around with "teaser rates" like you can with an ARM. For the most part they are about the same from lender to lender.
| - The obvious disadvantage is if rates go up making your monthly payments skyrocket.
- The terms of the loan can be more complicated which can be difficult for new borrowers. Having a lawyer look it over before signing is usually a good idea.
- You have to be prepared for added stress if your payment goes up, but staying on top of things and having some sort of an emergency exit plan can alleviate much of that.
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