When it comes to buying a home, one of the biggest financial decisions you’ll make isn’t about the house itself – it’s about the type of mortgage you choose.
In 2025, with mortgage rates averaging between 6–7%, many buyers are asking: Should I lock in a fixed-rate mortgage for stability, or consider an adjustable-rate mortgage (ARM) to save money upfront?
The answer depends on your finances, your lifestyle, and your long-term plans. This guide will break down both loan types, their pros and cons, and how to decide which option is right for you.
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What is a fixed-rate mortgage?
A fixed-rate mortgage has an interest rate that stays the same for the entire life of the loan.
Key features
- Common terms: 15, 20, or 30 years.
- Monthly payments stay the same (principal + interest).
- Predictability makes budgeting easier.
Pros
- Stability – your rate never changes.
- Easier to plan long-term finances.
- Protects you if interest rates rise.
Cons
- Higher starting rate than ARMs.
- You may pay more interest overall if rates drop in the future.
What is an adjustable-rate mortgage (ARM)?
An ARM starts with a lower interest rate for an initial fixed period, then adjusts periodically based on market conditions.
Key features
- Common terms: 5/1, 7/1, or 10/1 (first number = fixed years, second = how often it adjusts).
- After the fixed period, the rate can go up or down annually.
- Payments may increase (sometimes significantly) after adjustment.
Pros
- Lower initial rates than fixed mortgages.
- Can save thousands in the first 5–10 years.
- Good for short-term homeowners or those planning to refinance.
Cons
- Risk of higher payments in the future.
- Harder to budget long-term.
- Not ideal if you plan to stay in your home for decades.
Fixed vs ARM: a side-by-side comparison
| Feature | Fixed-Rate Mortgage | Adjustable-Rate Mortgage (ARM) |
| Starting interest rate | Higher | Lower |
| Payment stability | Always the same | Changes after fixed period |
| Long-term affordability | Safer if staying long | Riskier if rates rise |
| Best for… | Long-term homeowners | Short-term homeowners/refinancers |
| Budgeting | Easy to plan | Uncertain after adjustment |
Which one is better in 2025?
With today’s rates, both options have pros and cons depending on your situation.
Fixed-rate may be better if:
- You plan to stay in your home long-term (7+ years).
- You value predictability and peace of mind.
- You think interest rates may rise in the future.
ARM may be better if:
- You plan to sell or refinance within 5–10 years.
- You want lower monthly payments at the start.
- You’re comfortable with some risk and uncertainty.
Example: On a $400,000 loan in 2025:
- 30-year fixed at 6.5% → $2,528/month.
- 7/1 ARM starting at 5.5% → $2,271/month.
That’s a savings of $257 per month, or over $21,000 in the first 7 years.
How to decide: questions to ask yourself
- How long do I plan to stay in the home?
- Short-term = ARM may save you money.
- Long-term = fixed gives peace of mind.
- What’s my tolerance for risk?
- If a rate increase would stress your budget, fixed is safer.
- If you’re flexible financially, ARM could work.
- Do I plan to refinance?
- If yes, ARM may be smart – just be sure refinancing will be available when you need it.
- What are current rate trends?
- If experts predict rates will fall, ARM may help.
- If rates may rise, fixed protects you.
FAQs
Can I switch from an ARM to a fixed-rate later?
Yes, through refinancing – though future rates will determine if it’s beneficial.
Are ARMs risky in 2025?
They can be if you’re not prepared for higher payments. But if you know you’ll move or refinance, they can save money.
What’s the most popular option for first-time buyers?
Most choose fixed-rate mortgages for security, but ARMs are gaining popularity again in high-cost markets.
Conclusion: Choose the mortgage that fits your life
There’s no universal “best” mortgage type – the right choice depends on your goals, timeline, and financial situation. Fixed-rate mortgages offer stability, while ARMs provide flexibility and upfront savings.
At Arrive Realty & Finance, we help buyers compare options, run the numbers, and choose the loan structure that makes sense for their unique situation.
???? Contact us today for a personalized mortgage consultation – and let’s find the loan that works best for you.
