Which type of mortgage loan is best for you?
Several factors weigh into this decision: how long you plan to stay in the house, your interest-rate outlook, your budget, and your tolerance for risk.
Adjustable-rate mortgages are initially cheaper than fixed-rate loans. And they can be a good deal if you know you're going to stay in your home for a relatively short period of time. But you run the very real risk that interest rates could rise sharply and drive up your monthly payments. You are also placing a bet that you will actually be able to sell your house when you want to move.
Fixed-rate mortgages, on the other hand, have higher interest rates but offer no surprises. For many, that comfort is worth the added price.
To figure out which is best, you've got to consider both your best and your worst-case scenarios. Just fill in your numbers above and you'll see the scenarios for a fixed-rate mortgage and a best and worst-case scenario for your adjustable rate.