Ladies and gentleman, in a bout scheduled for five rounds, tonight’s match is one for the history books.

In our right corner, we have Adjustable Rate Mortgage, a.k.a. The ARM (intimidating, right?). It’s a home loan that features a lower initial interest rate for 5, 7 or 10 years, after which its rate adjusts with the market.

And in our left corner, we have the traditional, the popular, the classic, the 30-Year Fixed Rate Mortgage. The most common of them all, the 30-year fixed is a home loan that has a set interest rate for the life of your loan.

Both home loans have their strengths and weaknesses. But now, we’ll finally answer the question, Which one is the best?

Each round, these home loans will go toe to toe in five classic homebuying scenarios, including one you may even be going through yourself. We’ll look at the pros, the cons, and everything in between to determine which home loan has the upper-hand. After all, it could be the best time to buy a home, and you’re going to want a champion home loan that is right for you.

So without further ado, let’s get to the main event.


Ding, ding, ding.

Round one: You’re relocating soon


The scenario

So you’ve found the house. But because you’re planning on growing a family, this isn’t cut out to be your forever house. You’re looking to relocate to a new place between 5 to 7 years down the line.

Who’s got the advantage?

There may be nothing wrong with getting a 30-year fixed rate mortgage and only staying in your place for a 

short period of time. But with an ARM, you may be able to save money on interest payments in this situation.

When you get an ARM, you choose an initial term of 5, 7, or 10 years where your rate doesn’t change. Typically, you’ll get a lower rate and P&I payment during this period. So if you know you’re going to move relatively quickly after moving in, ARM might be the way to go.

Round-2.pngRound two: You’re craving stability

The scenario

You’re a planner. For you, stability is the ultimate dream. You knew when you bought your home, you were going to have to sometimes deal with the unexpected. So any way to create regularity is welcome.

Who’s got the advantage?

With a 30-year fixed rate mortgage, you can bank on identical P&I payments throughout the entire life of your loan. ARMs work a bit differently. After your initial term is over, your P&I payments can change depending on the market’s fluctuating interest rates.

So if you want stability, a 30-year fixed rate home loan gets the W.

Round three: You anticipate a major lifestyle change soonRound-3.png

The scenario

You’re in a hot point in your career. In your whole life, actually. According to your job trajectory, you see a significant raise in your near future.

Who’s got the advantage?

Many people deem ARMs right for them when they’re anticipating a lifestyle change. With an ARM, you may be better off saving money now with a lower monthly interest payment, but comfortable with a potentially higher monthly payment when the variable mortgage rate period kicks in.

With a fixed rate mortgage, that payment will never go up or down. So if you’re planning on that raise coming soon, looks like an ARM may get the advantage for you.

Round-4.pngRound Four: This is your forever home

The scenario

You’re buying a home, and this one’s for the long haul. It’s perfect: great size, location, and neighborhood. You look forward to spending the rest of your life here.

Who’s got the advantage?

If you’re planning on staying in your home for the better part of your life, you’ll be rolling the dice with an adjustable rate mortgage. Interest rates can be a hard thing to predict. By choosing an ARM, you may end up paying more in interest over the life of your loan thanks to variable mortgage rates.  

30-year fixed rate home loans are consistent. While you may get a slightly higher interest rate than an ARM to start, the regular monthly payments may help your budget and plan easier. And for that reason, it gets the advantage for this round.

Final Round: You’ve got a healthy down paymentRound-5.png

The scenario

You’ve been saving for a while to fulfill your dream of homeownership, and now you’re equipped with a large down payment. You’ve even found a house that’s within budget. The only thing left is to figure out which mortgage type is for you.

Who’s got the advantage?

ARM or 30-year fixed? That’s a tough fight this round. 

If you have at least 20% of your home’s purchase price for a down payment, you will avoid paying private mortgage insurance (PMI) for both a 30-year fixed home loan and an ARM. So in both cases, while a 20% down payment isn’t necessary, a larger down payment can help lower how much you pay over the life of your loan – making this round a big, old-fashioned tie.

Bell.pngDing, ding, ding.

With the final round over, it’s time to crown a victor. In the great battle between the ARM and the 30-year fixed rate mortgage, the winner is…


A draw! The truth is, there’s no “better” home loan between an ARM and a 30-year fixed rate mortgage. It all depends on your unique situation. However, envisioning yourself in these scenarios will help you sift through the pros and cons of each and get a clearer picture of which home loan is right for you.

Ready for the next step? Check this out now: Find the Right Mortgage and Lender with these 10 Questions.

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