When buying a home, you’ll have to decide between a fixed-rate mortgage and one that is adjustable, meaning the rate can change over time. Which is best for you typically depends on how long you plan to own the home.
With a fixed-rate mortgage you have the benefit of knowing that the payments will remain the same for the entire term of the loan.
On the other hand, an adjustable rate mortgage usually has a lower initial interest rate for a short period of time, such as one to five years, before it adjusts to a higher rate. You can therefore save some money in interest if you sell before the initial rate expires. Before agreeing to an adjustable rate mortgage, though, you should understand two important details: when will your payments be adjusted and how much could they possibly increase as the rate adjusts. If you have questions, talk to a local mortgage specialist.