How do you choose between a fixed-rate and adjustable-rate mortgage?

First, we take your ARM, then we take your LEG! lol, except in certain circumstances where you are pretty sure that you're not going to be in the home for very long, I'm not a big fan of ARMS. First, the devil is in the details...what is the starting rate? Then, what is your index and what is the lender's margin. What are the adjustment caps and do they round up or round down....all questions that you need to answer before taking an ARM.

I agree with everything that the article points out here...about comparing fixed rate to adjustable rate mortgages, EXCEPT, where they use a 10 year hold as to when the fixed rate will be better...I'd put that time period at about 4 to 5 years before it's a no brainer to take the fixed rate. Just my 2 cents worth!

I have always been a fan of adjustable rate mortgages, as a matter of fact w/ my last two homes I only took a mortgage w: an adjustable rate. Why you ask ? Well for one an adjustable rate is lower than a fixed rate so the savings can be terrific… I typically will do a 5/1 arm which means the interest rate is fixed for five years, it will never change, the payment will never change, and then on the anniversary going into the 6th year, it can change, it can go up, but it can also go down depending upon the market. So, again depending upon the loan size, the savings each month can be pretty significant. Plus a lot can happen in five years. Some folks end up relocating or buying a bigger and better home while some downsize after a few years.

The "Best Deal" on a mortgage isn't always the one who is quoting you the lowest rate/point combination. This is especially true if you're a first time home buyer or have any kind of special circumstances that might have to be worked around, such as credit issues, job changes, etc. If you're the prefect borrower (great credit, good time on the job, low debt to income ratios, etc., then you MIGHT be fine with a headset lender. Otherwise, I think that securing the services of a specific, experienced loan officer is generally a better deal...even if it costs you an 8th or a 1/4 in rate.

The best deal does not always carry the lowest rate, especially if that rate involves points and such, which is reflected in the APR. When comparing loan costs, look at the actual costs of the loan, sections A through E on the loan estimate. Sections F and beyond are prepaids and those are almost always going to be an amount they are going to be no matter who the lender is. Section F and beyond account for taxes and insurance. The lender cannot control that. Sections A through E and the amount there, will show you the true costs of the actual loan.