Fixed Rate Mortgages:
Fixed rate mortgages are typically 15 to 30 year loans where the monthly payments and the interest rate remain constant throughout the lifetime of the loan.
These types of loans are ideal if you are planning on living in the residence for 7 years or more and you expect your income and overall expenses to remain the same. Fixed rate mortgages are best for people who like the stability of fixed principal and interest payments while not worrying about the monthly payments increasing.
Adjustable Rate Mortgages:
Adjustable rate mortgages, or ARMs, are 15- 30 year loans where the interest rate on the loan may fluctuate depending on the terms of the loan and the market interest rate. This will cause your monthly payments to increase or decrease during the term of your loan.
ARMs are ideal if you are planning on living in your home for less than 7 years and you expect your income to increase in the future. Also, you should be comfortable with the possibility that your monthly payments may increase during the lifetime of your loan.