When shopping for a mortgage, one of the most important decisions you’ll make is choosing the right type of interest rate. Should you go with a fixed-rate mortgage or an adjustable-rate mortgage (ARM)? And what about those “short-term fixed” ARMs you’ve heard about? These short-term fixed loans are starting to make a recent come back. Let’s break it all down so you can choose the loan that fits your goals and financial comfort level.

🔒 Fixed-Rate Mortgages

What it is:
A fixed-rate mortgage has one interest rate that stays the same for the life of the loan—whether it’s 15, 20, or 30 years.

Why people choose it:

• Predictable monthly payments: Your principal and interest never change.
• Long-term planning: Great if you’re planning to stay in the home for many years.
• Peace of mind: No surprises due to market rate changes.

Best for:
Homebuyers who want stability and plan to live in the home long-term.

🔄 Adjustable-Rate Mortgages (ARMs)

What it is:
ARMs start with a lower interest rate for a set period (usually 5, 7, or 10 years), and then the rate adjusts periodically based on the market.

How it works:
A 5/1 ARM, for example, means the rate is fixed for the first 5 years, then adjusts once a year thereafter.

Why people choose it:

• Lower initial rate: Your starting payment is typically lower than a fixed loan.
• Short-term affordability: Helpful if you plan to sell or refinance before the rate adjusts.

Best for:
Buyers who plan to move, sell, or refinance within a few years—or who want lower payments upfront.

🔁 Short-Term Fixed ARMs

What it is:
Short-term fixed ARMs are a hybrid between fixed and adjustable loans. They offer a fixed rate for a specific period (commonly 3, 5, 7, or 10 years), then become adjustable.

Why it’s different from a regular ARM:
The term “short-term fixed” simply emphasizes the fixed intro period. These are still ARMs but highlight that initial stability.

Why people choose it:

• Balanced flexibility: Fixed payment security for a few years with lower rates than a 30-year fixed.
• Great for transitional buyers: Perfect for those who don’t expect to hold the mortgage long-term.

Best for:
Borrowers who need flexibility or expect income or lifestyle changes down the road.

🏡 Which Option Is Right for You?

• Go Fixed if you want long-term peace of mind and plan to stay put.
• Try a Short-Term Fixed ARM if you want the best of both worlds—stability up front, with potential savings.
• Choose a Full ARM if you’re okay with risk and want to maximize short-term affordability.

💬 Final Thoughts

Arms are not scary. Every borrower’s situation is different. A matter of fact my husband and I bought our first home with a 10-year fixed loan. When the 10 year was up, we refinanced into a 30-year fixed mortgage and ended up staying in that home for 15 years.  That’s why it’s important to talk with a knowledgeable mortgage advisor (like me!) who can walk you through the pros and cons based on your goals, timeline, and risk tolerance.

If you’re curious how these options could impact your monthly payments—or if you’d just like to explore your loan choices—let’s connect. I’m always here to help guide you home.