Fixed vs Adjustable-Rate Mortgages

When choosing a mortgage, one of the biggest decisions is whether to go with a fixed-rate or adjustable-rate mortgage. Each option has advantages depending on your financial goals and how long you plan to stay in the home.

What is a fixed-rate mortgage?

A fixed-rate mortgage has an interest rate that stays the same for the entire loan term. This means your principal and interest payment remains predictable over time.

What is an adjustable-rate mortgage (ARM)?

An adjustable-rate mortgage typically starts with a lower introductory rate that lasts for a set period. After that, the rate can adjust periodically based on market conditions.

Key differences

• Fixed-rate mortgages offer payment stability
• ARMs may start with lower initial rates
• ARMs carry the risk of future rate increases
• Fixed-rate loans are easier to budget for long-term

When a fixed-rate mortgage may make sense

Fixed-rate mortgages are often a good choice if you plan to stay in your home long-term or want predictable payments regardless of market changes.

When an adjustable-rate mortgage may make sense

An ARM may be appealing if you plan to move or refinance before the adjustable period begins, or if you’re comfortable with some payment variability.

Choosing the right option

The right mortgage depends on your financial situation, risk tolerance, and long-term plans. Comparing scenarios can help clarify which option fits your goals.