Fixed vs. Adjustable-Rate Mortgages: Which Is Best For You?

The process of buying a home is often a stressful and confusing one because of all the different choices the average buyer has to make.

From choosing the right location to negotiating prices and picking the right offers, the experience is packed with various conundrums and points for pondering at every turn. Among the different questions that you’ll end up asking when searching for a new place to settle down, there’s one particular deliberation that you’ll most likely have a harder time with: “Should I get a fixed-rate loan or an adjustable-rate loan?”

A tale of two loans

With the current rise of the mortgage lending market, both fixed-rate and adjustable-rate loans have come to light for homebuyers because of their widespread applicability.

When chosen correctly and used for their intended situations, both loans allow home buyers to reap their respective benefits, thanks to the fact that lenders and financial service providers continue to improve them. At Hawkins Home Loans, we’ve urged aspiring residents to understand what both options can do for them because of how helpful they can be in reducing the cost of and improving the experience of homeownership! 

Telling the two apart

As you continue to narrow your search and settle on a particular listing, the financing and loan application process will eventually lead you to the dilemma in question. Fortunately, choosing the right option for your needs doesn’t need to be a costly trial and error process because all it requires is knowing both options in greater detail: 

Fixed-rate mortgages 

The best way to define these loans is that they’re a lending vehicle that follows a standard mortgage interest rate that doesn’t change between the repayment term’s start to the end.

But how does it work? With fixed-rate mortgages, the monthly payments that you make generally cover interest and are evenly spread throughout. As the amount of money you pay monthly pays off your interest, a growing portion of your repayments is eventually allocated to the principal that you applied for.

How is the monthly payment calculated? Generally, the monthly payments in a fixed-rate mortgage are calculated based on the total amount that needs to be completely paid back over a specific period (one which ranges between 15 and 30 years). To maintain the constant monthly repayment amounts, these types of mortgages include balloon payments, which are a large accumulated payment that covers the remaining balance.

What’s it best for?: Fixed-rate mortgages are usually recommended for homebuyers who expect to follow a tight budget from month to month because they offer a constant monthly figure that can be anticipated without fail. This means that if you’re a buyer who prefers stability above all else, then this is the solution for you!

Adjustable-Rate mortgages (ARMs)

Today, ARMs have become a topic of much interest and discussion in the financial services industry because of their renewed and well-balanced approach to providing financing for mortgages. 

How does it work?: The average adjustable-rate mortgage follows a system, where those who use it can apply for a specific amount for financing and pay varying monthly payments depending on the markets that its calculated interest rates are tied to. With this type of mortgage, a borrower will be able to enjoy the possibility of having lower monthly payments at the expense of possible increases because of fluctuations in interest rates. 

How is the monthly payment calculated?: When it comes to understanding what goes into an adjustable-rate mortgage’s interest rates, the financial indices that it is tied to are important key points to watch out for. Depending on your service provider and the type of ARM product you used to purchase your home, funds, and indices like The Treasury Average, Prime Lending Rates, and annual rates on Treasury Securities can cause variations in rates.

What’s it best for?: As previously mentioned, ARMs bear the potential for lower rates at the price of higher interest rates depending on market conditions, which means that they bear a higher reward for the price of slight increases in some months. If you’re looking to leverage financial markets to your advantage, cash in on mortgage rates with low rates, and flip a listing before adjustable rates kick in, then this option is best for you! 


As you continue to dabble into the idea of securing financing for your homeownership dreams, you’ll arrive at that point where you’ll need to deliberate between fixed-rate and adjustable-rate mortgages. By considering the key tips mentioned above, you’ll be able to easily determine which option best suits your needs so that you can make the best decision moving forward!

Are you looking for a home mortgage loan in Sacramento, CA, to help you get a headstart on your homeownership dreams? Hawkins Home Loans is here to help. Get in touch with us today to learn more about our services!