Which type of mortgage is considered unwise by Dave Ramsey?

Dave Ramsey considers an Adjustable Rate Mortgage (ARM) unwise for several reasons. Primarily, an ARM has an interest rate that can fluctuate over time, which means that borrowers may face significant increases in their monthly payments if interest rates rise. This unpredictability can make budgeting difficult and may strain financial resources, especially for those on a tight budget or with fixed incomes.

Furthermore, ARMs often attract borrowers with initially low rates that later adjust to much higher rates. Many people may underestimate the potential for these rates to increase when market conditions change. This can lead to financial strain as homeowners might find themselves unable to afford their mortgage payments, which could result in foreclosure.

In contrast, fixed-rate mortgages provide stability since the interest rate remains constant throughout the life of the loan, allowing borrowers to plan their finances more effectively. Conventional mortgages can also vary, but they are typically more straightforward. Interest-only mortgages can lead to a situation where the borrower is not paying down the principal, which can be risky in the long term.

Overall, the unpredictability and potential for increased payments make an ARM a less favorable choice according to Dave Ramsey's principles of financial management and prudence.