What is the difference between a fixed-rate and adjustable-rate mortgage?

A fixed-rate mortgage and an adjustable-rate mortgage (ARM) differ in terms of interest rates. With a fixed-rate mortgage, the interest rate remains constant over the entire loan term, providing stability and predictable monthly payments. This type of mortgage is ideal for individuals who prefer budgeting and want long-term consistency in their mortgage payments. On the other hand, an ARM has an interest rate that initially remains fixed for a specific period, typically 5, 7, or 10 years. After the fixed-rate period ends, the interest rate adjusts periodically based on market conditions. This means that monthly payments can fluctuate over time, potentially increasing or decreasing. ARMs are suitable for individuals who anticipate changes in their financial circumstances or plan to sell their home before the fixed-rate period ends.