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Mark Cappel
UpdatedNov 22, 2010
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    2 min read
Key Takeaways:
  • Choosing which type of mortgage is best for you depends on your home ownership goals.

ARM vs. FRM: Which is Right for You?

Everyone who wants a refinance these days is finding one particular decision harder to make than ever and that is whether to go with a fixed or adjustable rate mortgage. The reasons behind this problem are simple:

  • Interest rates have remained so low for so long that it may be some time before a full recovery is seen on that front.
  • Federal intervention will help to keep interest rates down into 2011.
  • Housing prices are continuing to decline across the country.

The answer to the problem, however, is still the same. Choosing the right mortgage type is always going to be about what you want to accomplish as a homeowner. This means that if you define your goals as a homeowner, you will be able to better decide which type of mortgage is right for you.

Adjustable Rate Mortgages (ARMs)

If your goals with the home are short term (5 years or less), ARMs usually work out best. Though the interest rate can float, most people with short term mortgage needs are looking to refurbish and then sell or otherwise use the property to make some cash. The most attractive side of these mortgages are the current interest rates which are lower than on any other common mortgage product. Many ARMs can also include interest only payments which can help with cash flow problems.

Fixed Rate Mortgages (FRMs)

The best thing about any FRM is that you can calculate exactly what you will pay over the life of the loan. This provides safety and instant peace of mind for consumers looking to become homeowners. If planning is important and your home ownership goals are long term, applying for an FRM is typically the best option. Fixed rates are very low right now so many homeowners are choosing this option because of the security.