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 the interest rate structure. A fixed-rate mortgage has an interest rate that remains constant throughout the loan term. This stability allows borrowers to accurately budget their monthly payments, providing predictability and security. On the other hand, an ARM carries an interest rate that fluctuates periodically based on market conditions. Initially, ARMs often offer lower interest rates compared to fixed-rate mortgages, but these rates can adjust upwards in the future. The adjustment frequency and limit depend on the specific terms of the loan. ARMs suit borrowers expecting to move or refinance before the initial fixed-rate period ends, while fixed-rate mortgages offer greater long-term certainty for those seeking predictable payments over the loan's duration.