Should I get an adjustable rate mortgage or a fixed-rate home loan?

If you expect to live in the house at least four or five years, a fixed-rate mortgage is probably your best bet. Rates are still low, so you can lock them in for the life of the loan. If rates drop, you can always refinance.



If you only plan to stay in the house a few years or so, an adjustable-rate mortgage (ARM) can make more sense. You’ll probably save two or three percentage points off fixed-rate loan rates to begin with. The ARM rates are periodically adjusted. If you can find an ARM with an unusually low starting rate -- called a "teaser" rate by bankers -- you can enjoy low payments in the first year or two of the loan and then move before the rate has a chance to ratchet much higher. Make sure that the amount your ARM rate loan can rise after a certain period of time is limited.