Fixed-rate mortgage
With a fixed-rate mortgage, the interest rate used to calculate principal and interest remains unchanged for the loan term. This creates predictable principal-and-interest payments, although taxes, insurance or other housing costs may still change.
Adjustable-rate mortgage
An adjustable-rate mortgage, or ARM, typically begins with an initial rate period and can later adjust according to the loan's index, margin and adjustment rules. Caps may limit how much the rate can change.
The tradeoff
Fixed rates emphasize predictability. ARMs may offer different initial pricing but introduce uncertainty about future rates and payments. The better fit depends on the specific loan terms, expected ownership period, financial flexibility and tolerance for changing payments.
Questions to compare
Review the initial rate, loan term, adjustment schedule, index, margin, caps, fees and potential payment under less favorable rate scenarios—not only the starting payment.
Explore the numbers
Use the Mortgage Calculator for payment scenarios and visit Mortgage Rates & Data for broader rate context.
Educational information only. Mortgage products and adjustment rules vary by lender and loan.