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FRM vs. ARM

Posted on January 31 By MLP Lending Guide

There are several factors one must consider when deciding between getting a fixed rate mortgage and an adjustable rate mortgage. Who should get a fixed rate mortgage (or FRM)? An FRM is ideal for someone who needs the guarantee of payment stability that the fixed rate offers since the rate is "fixed," it will not increase and therefore you won't have to worry about your payments skyrocketing or putting an extra, unanticipated strain on your finances. That being said, FRM's usually have a higher monthly payment, and as such you must be sure that you can afford it. FRM's are also good for individuals who expect to have a long-term mortgage, particularly one that will last for more than seven years.

As the monthly payment associated with adjustable rate mortgages (ARM) are usually lower than FRM's, this option is good for people who need to save every penny. If you cannot afford the FRM payment or anticipate moving within seven years, then an ARM is the right choice for you. One of the reasons why the ARM is good in this situation is because there will be less time for the ARM rate to increase and become more of a burden. The longer you have an ARM, the more time there will be for the rate to possibly increase, so they are better for short-term loans.

If you do go with an ARM, consider making larger payments when you have the money for it. In doing so, you'll lower the loan balance faster, and thus if rates do go up, your increased payment won't be as high as it could've been.

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3 Responses to "FRM vs. ARM"
  1. Eddie Deaderick 27, Oct, 2011

    That's very inspiring stuff. Never recognized which experience can be this kind of varied. Thank you for every one of the passion to give such helpful this publish. . . .

      Reply»  
  2. Delphi 08, May, 2010

    Thanks.Great informational blog.I was looking for such an post because i had little knowledge on ARM's and FRM's and wanted to increase it.i checked many but was unable to find the specific answer on mortgages and loans.

      Reply»  
  3. Dotty Downhour 14, Mar, 2010

    bonjour, i wanted to stop and say thanks for that blog post this is one of the best websites ive found in a long time.

      Reply»  

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