A fixed-rate mortgage locks in the same interest rate for the entire loan term, so your principal and interest payment stays the same from the first payment to the last.
An adjustable-rate mortgage (ARM) typically starts with a lower introductory rate for a set period – often five, seven, or ten years – then adjusts periodically based on market rates.
Fixed-rate loans offer predictability, which suits buyers planning to stay in a home long-term or who prefer stable budgeting. ARMs can offer lower initial payments, which may suit buyers planning to move or refinance before the adjustable period begins.
The risk with an ARM is that if rates rise significantly by the time the adjustment period starts, monthly payments can increase substantially.
Choosing between the two depends on how long you plan to stay in the home, your risk tolerance, and where interest rates are expected to move.