What’s the Difference Between Fixed & Adjustable-Rate Mortgages?
The two main types of mortgages are fixed-rate and adjustable-rate. Each has pros and cons depending on your financial goals.
Fixed-Rate vs. Adjustable-Rate Mortgage (ARM)
| Feature | Fixed-Rate Mortgage | Adjustable-Rate Mortgage (ARM) |
|---|---|---|
| Interest Rate | Fixed for the life of the loan | Starts low, adjusts periodically |
| Monthly Payments | Stable, predictable payments | May increase or decrease |
| Best For | Long-term homeowners | Short-term buyers or those expecting rate drops |
| Common Loan Terms | 15, 20, or 30 years | 5/1, 7/1, or 10/1 ARMs |
Pros & Cons of a Fixed-Rate Mortgage
- ✔ Predictable monthly payments
- ✔ Protection from interest rate increases
- ❌ Higher initial interest rate compared to ARMs
- ❌ Less flexibility if rates drop
Pros & Cons of an Adjustable-Rate Mortgage (ARM)
- ✔ Lower initial interest rate
- ✔ Good for short-term homeownership
- ❌ Rates can increase over time
- ❌ Less payment stability
Which Mortgage Type Is Best for You?
- Choose a fixed-rate mortgage if you plan to stay in your home long-term. - Choose an ARM if you plan to sell or refinance within a few years.
The Bottom Line
Fixed-rate mortgages offer stability, while ARMs offer lower initial payments but come with rate change risks.
“Understanding mortgage types can help you find the best loan for your budget.”
— Sarah Thompson, Mortgage Expert
Frequently Asked Questions
Can I switch from an ARM to a fixed-rate mortgage?
Yes, you can refinance an ARM into a fixed-rate mortgage.
Which mortgage is better during high-interest rate periods?
A fixed-rate mortgage is better for long-term stability.
What happens when an ARM adjusts?
Your interest rate resets based on market rates, which can increase or decrease.