Here's why it is sometimes better to get a adjustable-rate Mortgage (ARM):

• You are only going to stay in the home for a short term. Why pay someone a higher interest rate on a 30-year fixed rate mortgage when you will only be there for a short term?
• You know you will be refinancing in a short amount of time, such as to pull out money for equity. Be careful of this, as you credit may go south, leaving you stuck with rates that may go up.
• You are an investor, you need the cash flow, and you believe rents will increase as rates do. Usually an investor refinances every few years to pull his cash out. If you are going to do that, you don't need an expensive fixed mortgage.

Here's why it is sometimes better to get a fixed rate loan:

• Believe it or not, sometimes there is a "sale" on fixed rate loans, and the rates are actually cheaper than adjustable loans. You should shop. Have your broker compare. I would always buy from a broker. They are not stuck with one bank. They can also charge less if they want to. A lot of times I find that Washington Mumutal (WAMU) has sales on fixed rate loans. Or sometimes their 10 year fixed is cheaper than their 5-year fixed. (10 year fixed means that after ten years the rate goes adjustable.)
• If you know you will be staying in the home for longer period of time.
• Peace of mind.

If you get an ARM, spend the time to get bids. Find out what the yearly and lifetime interest caps are. Find out what the index is (i.e., LIBOR), and what your margin is.

Written by Larry Maddocks, mortgage lender for Envision Lending Group, licensed in most states, and based in Salt Lake City, Utah