There’s more than one way to finance your dream home. You have options.
Want to limit your financial variables? A fixed-rate mortgage (FRM) could be the way to go.
Want to reduce your monthly costs? An adjustable-rate mortgage (ARM) may be ideal.
There’s only one question: which option is right for you?
This article was made to help you answer that question. By comparing the “pros” and “cons” of each loan, we hope to give you the confidence you need to make the best choice.
Let’s get started.
FRM vs ARM: What the Data Says
Fixed-rate mortgages are a widely popular choice for many Americans.
In fact, they generally constitute 92% of all U.S. mortgages. By contrast, adjustable-rate mortgages comprise roughly 8% of the total market.
But these numbers tell only one part of the story—and they’re not set in stone. Indeed, national interest in ARMs has recently been on the rise.
In April 2025, ARMs represented nearly 10% of all mortgages—the highest level since late 2023. Plus, on a dollar basis, nearly 25% of all new mortgage applications were for ARMs, buoyed by wealthy borrowers with larger loans.
Are fixed-rate mortgages more common than ARMs? Undoubtedly, yes.
But when you look a little closer, adjustable-rate mortgages are surging among key sectors. And while popularity is important to note, it’s not paramount.
What matters most is that you make the right choice for your unique circumstances and goals.
What Is a Fixed Rate Mortgage?
A fixed-rate mortgage never changes.
Whether you choose a loan term of 15, 20, or even 30 years, the interest rate stays locked.
Practically speaking, that means your principal-and-interest payments won’t increase, even if market rates skyrocket. The only variables in your total monthly payment are your property taxes and insurance.
If you like certainty, you’ll love a fixed-rate mortgage.
Pros and Potential Cons of Fixed Rate Mortgage
Life is compromise.
Before you choose a mortgage, it’s important to know what you gain (and what you relinquish).
Of course, it’s possible you’ll enjoy all of the available advantages and give up exactly nothing along the way.
Only time will tell.
Until then, let’s take a look at the “pros” of a fixed-rate mortgage.
FRM Pro #1: Predictable Monthly Payments
Egg prices may shift, but with an FRM, your principal-and-interest payments stay the same.
That’s why they’re ideal if you’re living on a fixed income, are a first-time buyer, or simply want to avoid financial surprises.
Fixed-rate mortgages are built for budgeting.
FRM Pro #2: Protection From Volatility
Financial markets hinge on the whispers of the Federal Reserve.
When the Fed even hints at hiking interest rates, Wall Street brokers go berserk.
But not you. Within the fortress of your fixed-rate mortgage home, your principal-and-interest payments won’t shift. Rates can go to the moon, and it won’t disturb your domicile.
FRM Pro #3: Peace of Mind
A fixed-rate mortgage is like an emotional anchor.
With global wars and rising inflation, nothing is guaranteed—except the monthly cost of your hard-won home.
Fixed-rate mortgages do far more than unlock your dreams. They provide peace of mind in an increasingly chaotic world.
Still, every advantage is defined by its equal and opposite disadvantages.
To help you make the most informed decision, we present the potential drawbacks of choosing a fixed-rate mortgage.
FRM Con #1: Higher Initial Interest Rate
FRMs often start with higher rates than their adjustable counterparts.
In other words, a fixed-rate loan asks you to trade (temporary) cost effectiveness for reliability. That’s part of the deal. And for many homeowners, it’s a winning bargain.
Plus, there are occasional periods where ARMs actually cost more than fixed-rate mortgages.
In April 2025, for example, ARM rates were slightly higher than the 30-year fixed mortgages.
FRM Con #2: Not Ideal for Short-Term Owners
Planning on selling (or refinancing) in the near future?
A fixed-rate mortgage may not be the right fit, especially if you’re thinking of making a change in the next five years.
After all, you could end up paying more money up-front without enjoying the benefits of a lengthy rate lock.
Fixed-rate mortgages are a long-term game.
Who Should Consider a Fixed Rate Mortgage?
If you ask us, those “cons” weren’t even that negative.
Either way, let’s clear up any cognitive dissonance and get to the heart of the matter: who should consider a fixed-rate mortgage?
In our experience, there are five situations where an FRM might be ideal:
- If you’re seeking stability on a predictable income. Salaried employees and retirees often get the most value out of a fixed-rate mortgage.
- If you’re a long-term homeowner aiming to put down roots for at least five years. Setting your eyes on your dream home? Even better.
- If you’re wary of market volatility and want protection from potential rate hikes. An FRM guarantees the same rate today, tomorrow, and throughout the life of the loan.
- If you value peace of mind over short-term savings. You’re not interested in gambling, but in going to bed knowing your home (and your future) are secure.
- If you prefer knowing your exact monthly payment, even if it costs slightly more than less predictable alternatives.
If you see yourself in one of these profiles—or in a combination of them—then a fixed-rate mortgage could be exactly what you need.
Still not sure? The next section will provide additional perspective.
What Is an Adjustable Rate Mortgage?
An adjustable-rate mortgage (ARM) changes over time.
But first, most ARMs start with an especially low rate for a set period (often three to ten years).
After this window, ARMs adjust at predetermined intervals: monthly, bi-annually, annually, or every few years.
For example, a 5/1 ARM carries a fixed interest rate for the first five years, after which the rate adjusts once per year.
Depending on market conditions, the new rate will either go up or down (or sideways).
To protect consumers from volatility, most ARMs have caps: limitations on how much interest rates can change. Common annual rate caps are 1 to 2%, while lifetime capsdetermine the total rate change over the loan’s term (i.e., 6% above the introductory rate).
So…what is an adjustable rate mortgage? It’s a great deal that offers up-front rewards (with the potential for long-term gain).
Pros and Potential Cons of Adjustable Rate Mortgage
Adjustable-rate mortgages are often misunderstood.
Though they may seem complex (and even a little risky), they often prove to be dynamic strategies for the right homeowners.
Let’s explore the primary advantages (and potential drawbacks) of choosing an ARM:
ARM Pro #1: Lower Initial Rate = Lower Monthly Payments
ARMs can help offset the cost of homeownership, especially in the early years of the loan.
In fact, even a slightly lower rate can free up large quantities of cash.
A brief comparison illustrates the point:
- Consider a $300,000 loan on a 30-year term at a fixed rate of 6%.
- Now, consider the same loan on a 5/1 ARM at 5% (with no adjustments).
At the end of the first five years, the 5/1 ARM at 5% will cost $11,291 less than the fixed-rate mortgage at 6%
That’s why ARMs are well worth your attention. Even 1% can make a world of a difference.
ARM Pro #2: Flexible Fit for Short-Term Homeowners
Planning to move or refinance in the next few years?
It may be best to stay flexible (not fixed).
By choosing an ARM, you can maximize the benefits of a low starting rate without facing adjustments.
If you see your next home as a stepping stone rather than your “forever” home, there’s no reason to get locked into a longer contract (and pay more along the way).
ARM Pro #3: Chance To Win If Rates Drop
Interest rates don’t always go up.
Sometimes, as in recent months, they go down. That’s great news if you have an ARM.
If rates fall during your adjustment period, your monthly payments could decrease. This upside potential is especially appealing to buyers who embrace the yin and yang of market forces.
To others, this unpredictability is less intriguing.
That’s why it also makes the shortlist of potential drawbacks.
ARM Con #1: Rates Can Rise After the Fixed Term
This is the primary concern for ARMs: rates could rise after the initial term.
Maybe you’re in retirement.Maybe you’re on a tight budget. Or, maybe you simply don’t like risk.
Either way, your concerns are valid.
Can you plan for potential increases (while enjoying the more affordable initial period)? Absolutely.
If you want a sure thing, however, a fixed-rate mortgage may offer more peace of mind.
ARM Con #2: Loan Term Complexity
Adjustable-rate mortgages involve a bit of fine-print and math.
You won’t need to buy economic textbooks or anything. We’re just saying that an ARM isn’t quite as simple as a fixed-rate mortgage.
To have confidence in your choice, you’ll want to get familiar with your loan policy and index as well as key terms like adjustment frequency and payment caps (both periodic and lifetime).
Knowledge is power, and understanding the details will limit surprises when rates adjust.
Who Should Consider an Adjustable Rate Mortgage?
An ARM can be a great option for homebuyers.
Wondering if you’re a good fit? These are some of the ideal profiles for an adjustable-rate mortgage:
- If you’re a short-term homeowner planning to sell (or refinance) within the initial period of an ARM.
- If you’re a first-time homebuyer who needs lower monthly payments to qualify for a mortgage (or afford a more expensive home).
- If you’re anticipating future income growth and want to free up cash with lower initial payments.
- If you want to maximize short-term affordability to support a growing family or business venture (or both!).
- If you plan to pay off your loan early and can enjoy the full power of the initial rate (while avoiding higher adjustments).
- If you like having optionality, monitor market trends, and embrace the potential of dropping rates during the adjustment period.
Keep in mind that you can also refinance an ARM into a fixed-rate mortgage.
This is a common strategy for savvy homebuyers, who keep an eye on low rates and take action before their ARM’s intro period ends.
Fixed Rate vs. Adjustable Rate Mortgages: The Choice Is Yours
The secret is out.
There’s no battle between fixed rate vs adjustable rate mortgages. There’s simply a choice—and a great one, at that.
As a homebuyer, you have two powerful pathways before you.
With a fixed-rate mortgage, you can enjoy predictable monthly payments. You can’t put a price on certainty and peace of mind.
With an adjustable-rate mortgage, you can savor lower principal-and-interest payments. What will you accomplish with financial flexibility?
With Quontic, you can make your dream home a reality.
Whether you’re in the early stages of the process, exploring loan options, or are ready to finance, we’ll help you get the mortgage you deserve.
Speak with our team to get started.
