This is Optimal Finance Daily episode 1761, why a fixed rate mortgage is the best choice,

and to do more, do less, both by paulapan of affordanything.com,

and on your host and personal finance enthusiast Diana Mariam.

Now let's get right to it as we optimize your life.

Why a fixed rate mortgage is the best choice, by paulapan of affordanything.com.

When you buy a home, you'll learn that there are two kinds of mortgages, fixed rate and adjustable

rate. What's the difference? A fixed rate mortgage gives you an interest rate that never changes,

an adjustable rate mortgage gives you a volatile interest rate. In times of slow economic growth

and low inflation, the interest rate will be low. In times of high economic growth and inflation,

the interest rate will rise. Why do some people like adjustable rate mortgages?

Advocates of adjustable rate mortgages argue that these give you a shot at getting lower rates

than you can ever get with a fixed rate. In late 2010, when the average fixed rate mortgage

was 4.5%, I overheard a guy sitting at the table next to me at a sushi restaurant,

bragging to his dinner companions about his brand new adjustable rate 3.25% mortgage.

It's true that he's getting a lower rate than those with fixed rate mortgages, for now.

You can't predict the future. But what's going to happen in 3 years, 5 years, even 10 years

when interest rates rise and this guy's 3.25% rises to a whopping 6 or 7%. Advocates for

adjustable rate mortgages argue two points. Number one, you never know which type of mortgage will

end up being cheaper in the end. Why not keep open the possibility of a cheaper mortgage?

Of course, that swings both ways. An adjustable rate mortgage might be cheaper or more

expensive down the road. There's no way to know. Why take on the added risk and uncertainty?

And number two, paying 7% in 10 years when you owe less on your mortgage is better than paying

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