Choosing between a fixed-rate and adjustable-rate mortgage (ARM) during refinancing can greatly impact your financial future. Understanding how both options work is key.

Fixed-Rate Mortgage:

With a fixed-rate mortgage, the interest rate remains the same for the life of the loan, providing stability in your monthly payments. This is ideal if you plan to stay in your home long-term or prefer consistent payments. It’s a safer option if interest rates are expected to rise in the future.

Adjustable-Rate Mortgage (ARM):

An ARM typically offers a lower interest rate for an initial period, often 3, 5, or 7 years. After that, the rate adjusts periodically based on market conditions, which can cause payments to fluctuate. ARMs are beneficial if you plan to sell or refinance before the adjustable period kicks in, or if you believe rates will decrease.

When deciding, consider how long you plan to live in your home, current interest rate trends, and your risk tolerance. A fixed-rate mortgage provides certainty, while an ARM can offer short-term savings with potential risks.