Fixed rate mortgages and adjustable-rate mortgages are similar yet different in many ways, let's explore a few.
The purpose of a fixed rate mortgage is that your payment remains the same through the life of the loan. This makes planning easier to understand and very easy to understand. If you want to take advantage of dropping interest rates, you would have to refinance, which means you would have to fill out more paperwork and extra costs. Also, if mortgage interest rates are high, they can be expensive option since there are no initial rate cuts. Fixed rate mortgages are pretty standard from lender to lender, meaning your loan has little chance of being customized.
One thing ARMs can do for you that fixed rate mortgages cannot is to allow you to afford a bigger mortgage. If you happen to be selling your home within five years or if you know your income will be rising then ARMs would be good for you.
If rates begin to fall you don't have to refinance in order to see your payments go down; they will be re calculated at the new, lower rates. With ARMs your payment and interest rate can go up during the life of the loan, even with caps in place. The initial rates usually lower than market rates, so when you receive your first adjustment, it can change since the caps don't apply to the first adjustment.