Fixed-rate and adjustable-rate mortgages differ mainly in how the interest rate behaves over time. The right structure depends on budget preferences, expected time in the home, and comfort with future payment changes.
Fixed-rate mortgage basics
The interest rate generally stays the same for the loan term, so principal-and-interest payments are predictable. Taxes, insurance, and association costs can still change.
Adjustable-rate mortgage basics
An adjustable-rate mortgage, or ARM, often starts with a fixed introductory period. After that, the rate may change based on an index, margin, adjustment schedule, and rate caps described in the loan documents.
Questions to ask before choosing
- How long is the initial rate period?
- How often can the rate adjust?
- What are the first, periodic, and lifetime caps?
- Could the maximum payment fit the household budget?
- How long do you expect to keep the loan?
Compare APR, closing costs, and total cost under more than one scenario. Visit our home loans guide for additional mortgage and refinance education.