A comparison of fixed-rate mortgages and adjustable-rate mortgages should be an important consideration for any borrower who wants to purchase a home, refinance an existing mortgage or take out a home equity loan or line of credit — also called a second mortgage.

The main advantage of fixed-rate mortgages is that — just as the name implies — the interest rate on these mortgages is fixed and will never change. That means the interest rate — and the monthly principal and interest payment — will be essentially the same in the last month of the loan as it was in the first month of the loan.

For the borrower, a fixed-rate mortgage offers peace of mind that the lender can never change the interest rate.

Main disadvantage

The main disadvantage of fixed-rate mortgages is that the initial interest rate on these mortgages is generally higher than the initial interest rate on an ARM.

The higher interest rates on fixed-rate mortgages mean these mortgages may be more expensive than ARMs over time for borrowers. But if market interest rates rise, borrowers who have fixed-rate mortgages will still have the advantage of that lower fixed rate and may save money.

The choice between a fixed-rate mortgage and an ARM is yours, but Bankrate’s ARM or fixed-rate calculator can help you decide.

The most popular fixed-rate mortgages that can be taken out are for 15 years or 30 years — but that’s another decision the borrower who chooses a fixed-rate mortgage will have to make.

In general, 30-year fixed-rate mortgages offer lower monthly payments than 15-year fixed-rate mortgages. However, 15-year mortgages allow borrowers to pay off the loan sooner and reduce the interest expense over the term of the loan. Borrowers who choose the shorter term should be sure they feel comfortable with the higher payments.

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