Why might a borrower prefer a fixed-rate mortgage over an adjustable-rate mortgage?

A borrower might prefer a fixed-rate mortgage primarily to achieve predictable monthly payments and to safeguard against potential interest rate increases over time.

Fixed-rate mortgages have an interest rate that remains constant throughout the life of the loan, which means that the monthly payment for principal and interest does not change. This predictability helps borrowers budget effectively, as they can plan for the same payment each month regardless of fluctuations in the market. On the other hand, adjustable-rate mortgages (ARMs) come with rates that can change periodically based on market conditions, which introduces uncertainty and the potential for higher future payments.

Additionally, opting for a fixed-rate mortgage protects the borrower from rising interest rates in the future. If market rates increase, borrowers with fixed-rate mortgages will not be affected, whereas those with ARMs may see their payments increase significantly, leading to affordability challenges.

The other options do not address the core concern of payment stability and risk management associated with interest rate changes. For example, lower initial payments typically relate to adjustable-rate mortgages, which often entice borrowers with a lower starting rate. Avoiding mortgage insurance and capitalizing on refinancing opportunities pertain to different aspects of mortgage financing and do not directly address the reason someone might choose the stability of a fixed-rate mortgage.