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

A fixed-rate mortgage has a set interest rate that remains unchanged throughout the entire loan term, providing stability and predictable monthly payments. This type of mortgage is ideal for borrowers who prefer budgeting certainty and long-term planning. On the other hand, an adjustable-rate mortgage (ARM) features an interest rate that adjusts periodically, typically after an initial fixed-rate period. This adjustment is based on a predetermined index and fluctuates with market conditions. ARMs offer an initial lower interest rate, which can be advantageous for borrowers planning to sell or refinance within a few years. However, it also introduces a level of uncertainty, as monthly payments can increase or decrease over time. The choice between the two will depend on personal circumstances, risk tolerance, and financial goals. Franklin American Mortgage Company can provide further guidance to assist borrowers in selecting the most suitable mortgage option.