The Case for Adjustable-Rate Mortgages

Bloomberg's Megan McArdle argues that Adjustable-Rate Mortgages are equally as safe as fixed-rate mortgages, and dissects essential factors for borrowers to consider while selecting financing options.

This is approximately how the real world works: If you (the borrower) want someone (the lender) to take on more risk (by committing to a fixed interest rate), you have to pay them to do it (by paying an elevated interest rate). So while a fixed-rate product locks in the interest rate, it also locks in a premium for enjoying that lower interest rate. There is no free lunch.

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