Fixed vs. Adjustable Rate Mortgages: Which One Is Right for You?
Choosing the right type of mortgage is one of the most important financial decisions you’ll make when buying a home. The choice often comes down to two main options: a Fixed-Rate Mortgage (FRM) or an Adjustable-Rate Mortgage (ARM). Each option has its own advantages, trade-offs, and ideal use cases. The best choice depends on your financial goals, how long you plan to stay in the home, and your comfort with potential rate changes. In this guide, we’ll break down the key differences, help you understand which is best for your situation, and explain how Security National Mortgage Company can support you every step of the way.
What Is a Fixed-Rate Mortgage?
A fixed-rate mortgage keeps your interest rate—and your monthly principal and interest payments—the same for the entire term of the loan. Whether you choose a 15-year or 30-year fixed loan, your rate is locked in from the beginning.
Key Benefits of a Fixed-Rate Mortgage:
Your monthly payments remain predictable.
You’re protected from interest rate increases.
It’s easier to budget and plan long term.
Who Should Consider a Fixed-Rate Mortgage?
This option is ideal for homebuyers who:
Plan to stay in their home for many years
Prefer consistency and predictability
Want to avoid the risk of rising rates
What Is an Adjustable-Rate Mortgage (ARM)?
An adjustable-rate mortgage starts with a lower interest rate that stays fixed for an initial period—commonly 5, 7, or 10 years. After that period, the rate can adjust annually based on a financial index chosen by the lender.
For example, a 5/1 ARM has a fixed rate for five years and then adjusts once per year for the remaining term of the loan.
Key Benefits of an ARM:
You’ll likely start with a lower interest rate.
Your initial monthly payments may be lower.
It can be a great fit for short-term homeowners.
Who Might Prefer an ARM?
An ARM could be a smart option for buyers who:
Plan to move or refinance within 5 to 10 years
Expect their income to increase over time
Are comfortable with the possibility of rate changes later on
How Interest Rates Differ Between the Two
Generally, ARMs begin with lower interest rates than fixed-rate mortgages, which can lead to early savings. However, after the fixed period ends, your interest rate may increase—sometimes significantly—depending on market conditions. This makes ARMs better suited for people who don’t plan to hold the mortgage long term.
Fixed-rate mortgages may start slightly higher, but they provide peace of mind by eliminating the risk of payment changes over time.
When a Fixed-Rate Mortgage Might Be the Better Option
You may want to choose a fixed-rate mortgage if:
You plan to live in the home for 10 years or longer
You want protection from future interest rate hikes
You prefer long-term financial stability
You have a fixed income or strict monthly budget
When an ARM Might Be the Right Choice
An adjustable-rate mortgage may make more sense if:
You’re planning to sell or refinance before the fixed period ends
You want lower payments now and can manage potential increases later
You believe rates will stay the same or go down over time
You’re trying to maximize your purchasing power in the short term
What Happens When an ARM Adjusts?
Once the fixed-rate period ends, your interest rate will be recalculated periodically. Lenders use a benchmark index (such as the 1-year Treasury or SOFR), add a fixed margin, and apply any limits or "rate caps" that control how much your rate can increase at each adjustment and over the life of the loan.
This means your monthly payments could go up—or down—based on how the broader market performs after the fixed term.
Questions to Ask Yourself Before Deciding
To help choose between a fixed-rate and adjustable-rate mortgage, ask yourself:
How long do I expect to stay in this home?
Can I afford higher payments if my rate goes up in the future?
Is the initial savings worth the risk of rising payments later on?
Do I have a long-term financial plan that supports either option?
Your personal situation, risk tolerance, and goals will ultimately determine the right fit.
How SNMC Can Help You Choose
At Security National Mortgage Company, we’re committed to helping you make informed, confident decisions about your mortgage. Our expert team will walk you through:
Comparing fixed vs. adjustable-rate options
Estimating how each type affects your monthly payments
Understanding future rate adjustments and caps
Choosing a loan that fits your lifestyle and goals
We take the time to understand your situation—so you get a mortgage that works for you, now and in the future.
Final Thoughts
Both fixed-rate and adjustable-rate mortgages offer valuable benefits, depending on your needs. If you’re looking for long-term predictability, a fixed-rate mortgage may give you peace of mind. If you want to lower your payments now and plan to move or refinance soon, an ARM could help you save in the short term.
Whichever path you choose, SNMC is here to provide clarity, trusted guidance, and mortgage solutions tailored to your goals.
