Fixed vs. Adjustable-Rate Home Loans: Which Is Right for You?
When you’re ready to buy a home, one of the biggest decisions you’ll make is choosing between a fixed-rate and an adjustable-rate home loan. Each type works differently and has its own pros and cons. This blog explains both options in simple terms so you can choose the best path forward. Whether you're buying your first home or upgrading to a new one, understanding how home loans work can save you money and stress.
What Is a Home Loan?
A home loan is money you borrow to buy a house. You pay it back over time, usually 15 to 30 years, along with interest. Interest is the cost of borrowing money. The type of loan you pick affects how much you pay every month and over the life of your loan.
There are two common types of home loans you’ll hear about: fixed-rate and adjustable-rate. Both help you buy a house, but they work in different ways. Picking the right one can make a big difference in your monthly payment and your peace of mind.
What Is a Fixed-Rate Home Loan?
A fixed-rate home loan means your interest rate stays the same for the entire life of the loan. If your loan is for 30 years, your rate never changes during those 30 years.
That means:
Your monthly payments stay the same.
You don’t have to worry about rates going up.
It’s easier to plan your budget.
This type of loan is a good choice if you plan to stay in your home for a long time and want steady, predictable payments. Many homeowners like fixed-rate home loans because they offer peace of mind.
What Is an Adjustable-Rate Home Loan?
An adjustable-rate home loan (also called an ARM) has an interest rate that can change over time. Usually, it starts with a lower rate for a few years, often 3, 5, or 7 years, and then it adjusts once a year.
That means:
You might save money at first with lower payments.
After the fixed period, your rate can go up or down based on the market.
Your monthly payments can change over time.
Adjustable-rate home loans are a good option if you plan to move or refinance before the rate starts to change. They give you a lower payment early on, but you’ll need to be ready for possible increases later.
How to Choose the Right Type of Loan
Choosing between a fixed-rate and adjustable-rate home loan depends on your life plans, your budget, and how comfortable you are with risk.
If you want to stay in your home for many years and want payments that never change, a fixed-rate home loan is probably the better fit. It’s stable and simple.
If you think you’ll move in a few years or expect your income to grow, an adjustable-rate loan might work well. It gives you a lower payment in the beginning, which can help you save money short term.
Before making a decision, it helps to speak with a local lender who understands your needs. At River City Federal Credit Union, our team walks you through every step of the home loans process. We explain your options clearly, so you can pick the home loan that’s best for you and your future.
Why It Matters in 2025
Interest rates have been moving up and down over the last few years. In 2025, many buyers are asking: “Should I lock in a rate now, or take a lower rate that might go up later?”
The answer depends on how long you plan to stay in the home and how much risk you're okay with. A fixed-rate home loan gives you a shield against rising rates. An adjustable-rate loan gives you short-term savings, but you’ll need to be ready if rates rise in the future.
Talking to a trusted lender can help you make the best choice for home loans. Our experts at River City Federal Credit Union understand today’s market and can help you navigate what’s right for you.
How River City Federal Credit Union Can Help
When you apply for a home loan at River City Federal Credit Union, you’re not just filling out forms. You’re getting real support from a team that’s local, experienced, and here to help.
We take time to understand your financial goals and home-buying plans. Then, we help you pick a loan that matches those goals, whether that’s a stable fixed-rate option or a flexible adjustable-rate loan.
We also offer:
Clear answers to your questions
Competitive rates
Fast, simple pre-approvals
Guidance for first-time buyers
Your journey to homeownership doesn’t have to be confusing. With the right help, it can be exciting and rewarding.
Final Thoughts
Buying a home is one of the biggest financial steps you’ll ever take. Choosing the right type of home loan is just as important as finding the right house. Understanding how fixed and adjustable-rate home loans work helps you feel confident in your choice.
At River City Federal Credit Union, we’re here to make the process simple. We’ll help you compare your options, understand the costs, and move forward with a plan that works for you.
If you’re ready to explore your options, visit us and take the first step toward buying your dream home.