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

A fixed-rate mortgage is one in which the interest rate remains unchanged for the entire duration of the loan. This means that monthly payments remain the same, making budgeting easier and providing stability to homeowners. On the other hand, an adjustable-rate mortgage (ARM) has an interest rate that is subject to change over time. Initially, an ARM offers a lower interest rate compared to a fixed-rate mortgage. However, after a specified period, the interest rate can adjust periodically, either increasing or decreasing based on market conditions. This can result in fluctuating monthly payments, making budgeting more challenging. While fixed-rate mortgages provide predictability, ARMs may be attractive for those planning to sell or refinance before the adjustment period begins. Ultimately, choosing between the two depends on personal financial goals and circumstances.