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With interest rates lower than they have been in decades and home prices a bargain compared to recent years, the housing market is starting to show signs of heating up again or at least more than it has been. If you are in the market for a new home, one of the many decisions you will have to make is whether you should get a fixed-rate loan or an adjustable-rate loan. Depending on your situation, one may be better than the other.

If you are planning on staying in your home for a long time, it’s probably best to go with the fixed-rate loan. The current national average for a 30-year fixed rate loan is around 5%, which is considered quite low. Fixed-rate loans offer the safety and peace of mind of know exactly what your mortgage payment will be throughout the life of the loan. When the economy recovers, it will likely bring higher mortgage rates with it. You’ll be thankful for your 5% when the national average goes over 6% as it was last year. On a $200,000 30-year mortgage, the difference between 5% and 6% is about $125 per month.

If, on the other hand, you don’t plan to stay in your home for long, an taking the lower-rate adjustable-rate mortgage might still make some sense. For example, if you were to move within the low introductory rate period, you would never have to deal with your rate adjusting. ARMs are typically available with one, three and five year fixed periods. If you know that you are going to move in three to four years, a 5-year adjustable-rate mortgage probably would not cause you problems. You can use the money you save on monthly payments to build your emergency fund or contribute to your retirement savings.

Adjustable-rate mortgages don’t offer the same savings they once did, however. There was a time when you could save up to two percentage points with an ARM. In this low-rate environment, interest rates for ARMs are averaging less than 0.5% lower than fixed-rate mortgages. With so little difference in interest, the added risk they pose may not be worth it to you if your future plans are not solid.

For those who are already in adjustable rate mortgages and considering refinancing to a fixed-rate mortgage, the decision becomes more complicated. The biggest fear with an ARM is that when the introductory period is over it will reset to a higher rate. Because interest rates across the board are lower right now, however, many ARMs are actually adjusting downward.

How your ARM adjust depends on what index it is tied to and what your margin over that rate is. If your loan is tied to an index that has a low rate when it adjusts, and your margin is sufficiently low, you may actually end up getting a very low new interest rate. The new rate you get will likely be fixed for one year. For example, say you have an ARM that’s tied to the 1-year Treasury Index, which is currently at 0.52%, and your margin is 3%. If your rate resets right now, your new rate would be 3.52%. That’s a very low rate even by current standards. In this case, it makes sense to hold off on a costly refinance, but you may still need to refinance down the line if you stay in your home.

— For more ways to save, spend, invest and borrow, visit MainStreet.com.