Choosing the right mortgage can save you thousands over the life of your loan. In 2025, buyers have two main options: fixed-rate mortgages (FRM) and adjustable-rate mortgages (ARM).
Let’s break down the differences so you can make the smartest choice.
1. What is a Fixed-Rate Mortgage?
A fixed-rate mortgage has the same interest rate for the entire loan term. This means your monthly payments are predictable.
- Typical Terms: 15, 20, 30 years
- 2025 Rates: 6.25% – 7.10%
Pros:
✔ Predictable payments
✔ Protection against rising interest rates
Cons:
✘ Higher initial rate than ARMs
✘ Less flexibility
2. What is an Adjustable-Rate Mortgage?
An adjustable-rate mortgage starts with a low fixed rate for a set period (e.g., 5 years) before adjusting annually based on market rates.
- Initial Rates (2025): 5.85% – 6.50%
- Adjustment Period: After initial fixed term
Pros:
✔ Lower initial rate
✔ Can save money if you sell or refinance early
Cons:
✘ Payments may increase
✘ Less predictability
3. How to Choose Between Fixed and ARM in 2025
Ask yourself:
- How long will I stay in the home? If more than 7 years → Fixed rate is safer.
- Do I expect interest rates to drop? ARM could be beneficial short term.
- Can I handle payment increases? If not, choose fixed.
Final Tip:
If you plan to sell or refinance in 3–7 years, an ARM might save you thousands. But for long-term stability, a fixed-rate mortgage is the safest bet.