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

A fixed-rate mortgage refers to a home loan where the interest rate remains the same throughout the entire term of the loan. This means that the monthly mortgage payments also remain constant, allowing borrowers to accurately budget their expenses. On the other hand, an adjustable-rate mortgage (ARM) has an interest rate that can change periodically, typically after an initial fixed period. The initial interest rate is usually lower than that of a fixed-rate mortgage, making it attractive to borrowers initially. However, after the fixed period ends, the interest rate may fluctuate based on market conditions, potentially leading to higher or lower monthly payments. The choice between a fixed-rate and adjustable-rate mortgage depends on individual financial goals, risk tolerance, and the length of time one plans to stay in the home.