After discussing different options for the type of mortgage a client might want, the conversation will often come back to this question: am I better off with an adjustable rate mortgage or a fixed rate mortgage? And while I would love to be able to definitively answer that question for my customers, the truth is, the answer is based upon what they are looking for.

But what it all boils down to is risk and repayment. So, if you are willing to take the chance that interest rates will remain low enough that you pay less in interest over the life of the loan than you would with a fixed rate mortgage at a higher interest rate, then an adjustable rate mortgage is a good option for buying your new house. But, if you are uncomfortable with changing monthly payments, then a fixed rate mortgage is certainly the right choice.

As for repayment, you want to look at your time horizon and your ability to pay. If your time horizon is less than ten years to have the mortgage paid off or to refinance or move, then an adjustable rate mortgage will be very attractive, as you can lock the rate in for most or all of that time at a lower rate than a fixed rate mortgage, then be done with it before it adjusts.

Similarly, from an ability to pay stand point, if you are in a commission/bonus heavy profession, and your monthly income from the salary is low, then an adjustable rate mortgage might make sense. You can pay the lower monthly payment every month, then make large principal payments when you get your bonuses and commissions.

Whatever you are planning, it makes sense to contact a mortgage professional to discuss your options. If you have any questions about fixed rate or adjustable rate mortgages, please contact me. And if you have anything to add about the benefits of fixed or adjustable rate mortgages, please leave a comment.