What is better? Fixed Rate Mortgage(FRM) or Adjustable Rate Mortgage(ARM)?
First, what is a FRM? - A FRM is a mortgage in which the interest rate does not change during the life of the loan.
Second, what is an ARM? - An ARM is a mortgage in which the interest rate changes over time based on an index. ARMs usually have a lower rate because they are riskier to the borrower.
What is the better option for me? It really depends on where the market is. If the market has very low rates already, it is usually better to lock in with a FRM to guarantee that rate for the life of the loan. If the rates are rising, you may want to go with an ARM because rates tend to be lower.
The risk in an ARM is that the rates will go up after a period of time. There are different types of ARMs so you can discuss with your lender what the different options are.
The most important thing is to make sure that you are looking at your goals and making sure that your mortgage fits in with your goals.
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