The reality is that most people only stay in a particular loan for six to eight years. It is very rare to meet anyone who stays in a 30 year fixed loan for the full term because life and circumstances change. That’s why it often makes sense to consider an adjustable rate mortgage (ARM) as an option to structure your financing.
Generally speaking, rates on adjustable rate mortgages are lower than fixed because investors don’t have to hedge against such long-term economic timelines. This means lower payments and better cash-flow to the consumer.
Of course, it also means that the payments are subject to change after the initial fixed period. Most consumers refinance at the end of the period or plan to sell the property. The risk of shock to massive payment adjustments are thus managed and tolerable.