Fixed-Rate vs Adjustable-Rate in 2025: Which One Wins?

When it comes to choosing the right mortgage in 2025, many homebuyers are asking: Should I go with a fixed-rate mortgage or an adjustable-rate mortgage (ARM)? With interest rates in flux, market uncertainty, and a shifting real estate landscape, this decision matters more than ever. At the Seabrooke Group, we understand how overwhelming it can feel—especially for first-time buyers or those refinancing. That’s why we’ve broken it down for you.

Understanding the Basics

What is a Fixed-Rate Mortgage?

A fixed-rate mortgage offers the same interest rate for the life of the loan. Whether you're on a 15, 20, or 30-year term, your monthly mortgage payment stays the same. It’s ideal for buyers who want predictability and plan to stay in their home long-term.

What is an Adjustable-Rate Mortgage (ARM)?

An adjustable-rate mortgage usually starts with a lower interest rate for a fixed period (such as 5, 7, or 10 years). After that, the rate adjusts annually based on market conditions. A common structure is the 5/1 ARM: a fixed rate for 5 years, then a variable rate that changes once a year.

Market Conditions in 2025

The real estate and lending market in 2025 is dynamic. Mortgage interest rates have fluctuated significantly due to inflation pressures and Federal Reserve policy changes. Fixed mortgage rates remain higher than historical averages, while ARMs are offering lower starting rates, drawing attention from buyers looking for flexibility.

So, which mortgage is better in 2025? Let’s explore.

Pros and Cons of Fixed-Rate Mortgages

Pros:

• Predictable monthly payments

• Long-term rate stability

• Great for buyers who plan to stay 10+ years
  

Cons:

• Higher initial interest rate than ARMs

• Not ideal if you plan to sell or refinance in a few years

Pros and Cons of Adjustable-Rate Mortgages (ARMs)

Pros:

• Lower initial rate = lower monthly payments

• Potential to save money if moving or refinancing before the adjustment period
  

Cons:

• Payments may increase significantly after the fixed period

• Uncertainty can be risky in a rising rate environment

Fixed vs Adjustable Mortgage: Which One Wins?

There’s no one-size-fits-all answer. Here’s when each mortgage type shines:

Go Fixed-Rate If You:

• Want payment stability

• Plan to stay in your home long-term

• Expect interest rates to rise in the future

Consider an ARM If You:

• Plan to move or refinance within 5–7 years

• Want lower initial payments

• Are comfortable with some financial risk

Real-Life Examples

1. Maria & James – First-Time Buyers: Buying their forever home in Alameda County. They chose a fixed-rate mortgage to ensure stable payments for 30 years.

2. Ken – Tech Professional in Santa Clara: Buying a condo he plans to sell in 5 years. He chose a 5/1 ARM to take advantage of lower monthly payments.

Tools & Tips to Help You Decide

• Use online mortgage calculators to compare monthly payments

• Ask your lender about rate caps on ARMs

• Know your financial goals and risk tolerance
  

We always recommend sitting down with a trusted advisor to review your options. At Seabrooke Group, we help clients align their mortgage decisions with their long-term financial plans.” – Mark Hicks, Broker at Seabrooke Group

Final Thoughts

In 2025, the decision between a fixed-rate and an adjustable-rate mortgage depends on your timeline, budget, and risk comfort. There is no universal winner—only what works best for you.

If you’re ready to buy a home or refinance and need help choosing the right mortgage, contact the Seabrooke Group today. We’re here to guide you through every step.

Still undecided? Download our free Mortgage Comparison Checklist or schedule a consultation with our mortgage specialists.