Fixed-Rate or Adjustable-Rate Mortgage: Which is Right for You?
New neighbors Bob and Sam moved onto a quiet block in South Minneapolis around the same time in 2004. Their homes, which sit across the street from one another, are close in value—each sold for about $200,000—and both Bob and Sam made a 10% down payment.
About ten years after moving in, Bob and Sam began chatting about their homes at a neighborhood barbecue. The subject of mortgage payments came up, and Bob was floored to learn that Sam’s were considerably less. In fact, after punching in a few numbers on his calculator, Bob realized that over the course of the last decade, he had paid almost $24,000 more than Sam on interest and principal payments.
How did Sam get so lucky? When he bought his home in 2004, he opted for an Adjustable-Rate Mortgage (ARM) instead of the standard fixed-rate mortgage. This meant that his interest rate varied over … Read More