Adjustable rate mortgages or ARMs we’re basically created as a more affordable alternative to fixed-rate mortgages when interest rates were high. The idea being that interest rates would be set lower and then adjusted upwards based on a predetermined formula. These types of mortgages made it more affordable for people to own their own homes.

Fixed rate mortgages are exactly what the name suggests. The interest rates and principal are fixed over a period of time, usually 15 or 30 years, and do not fluctuate or get readjusted. The advantage of having a fixed-rate mortgage is in locking in interest rates that are low. If interest rates should happen to fall below the level that you locked in your mortgage at, you then have the option to refinance it to lock in the lower rates.

Right now it is a no-brainer. Mortgage rates are at historical lows. For people with excellent credit, home loan interest rates are now hovering around the 4.5% level. While conversely, homeowners with adjustable-rate mortgages are seeing their interest rates being readjusted higher and higher as per the agreement when they signed the original documents.

If you currently hold an adjustable rate mortgage and are considering converting it to a fixed rate mortgage you must first ask yourself two important questions; How long do you plan on staying in your home, and will the loan and attorney fees offset any gains that you make by locking in the lower  interest rate.

It is a good idea to shop around and see what rates are being offered. A great place to conduct your comparison shopping is on the Internet. It is also suggested that you take advantage of the mortgage interest rate calculators that are available there to help you decide what kind of payments you’ll be making on various home loan interest rates.