ARM vs. Fixed Rate Mortgage
Compare a fixed rate mortgage with two types of adjustable rate mortgages (ARMs), a fully amortizing ARM and an interest only ARM. With a fully amortizing ARM, the monthly payment is calculated so you will pay off the complete mortgage balance at the end of the term. With interest only ARMs, you are only required to pay interest in your monthly payments which may result in lower payments initially but a balloon payment at the end of the term.
Both types of ARMs have rates that can change, causing your monthly payment to increase or decrease throughout the term. A fixed rate mortgage will keep the same monthly payment for the entire term of the loan. Use this calculator to figure out which option would work best for you.