What’s the Difference Between a Fixed-Rate and Adjustable-Rate Mortgage?

When it comes to financing a home, one of the most important decisions you'll make is choosing the type of mortgage that fits your financial situation. Two common options are fixed-rate and adjustable-rate mortgages (ARMs). Each has its pros, cons, and ideal scenarios—so let’s break it down clearly.

Fixed-Rate Mortgage: Predictability and Stability

With a fixed-rate mortgage, your interest rate stays the same for the life of the loan—whether that’s 15, 20, or 30 years. This means your monthly principal and interest payments never change (property taxes and insurance can still fluctuate).

Pros:

• Predictable monthly payments – easier to budget long term

• Protection from interest rate hikes

• Ideal if you plan to stay in the home for many years

Cons:

• Initial interest rate is usually higher than the starting rate of an ARM

• You could pay more in interest if rates go down later and you don’t refinance

Adjustable-Rate Mortgage (ARM): Lower Intro Rate, More Risk

With an ARM, your interest rate is fixed for an initial period (commonly 5, 7, or 10 years), then adjusts periodically based on market rates. For example, a “5/1 ARM” means your rate is fixed for 5 years, then adjusts once a year.

Pros:

• Lower initial interest rate = lower starting monthly payments

• Can be smart if you plan to sell or refinance before the fixed period ends

Cons:

• Your monthly payment could increase significantly after the intro period

• Harder to budget long-term housing costs

• Can be risky if rates rise and you’re still in the home

Which One Is Right for You?

• Go fixed if you want long-term certainty and plan to stay in the home for 7+ years.

• Go ARM if you need a lower payment now and plan to move, refinance, or pay off the loan before the adjustment kicks in.

Final Thoughts from a Financial Planner

Mortgages aren’t just about getting approved—they’re about aligning the structure of your loan with your life plan. Before deciding, consider your income stability, job plans, family goals, and how long you expect to stay in the home.

And remember: the lowest payment today isn’t always the best long-term choice.

If you’re considering buying a home or refinancing, I’d be happy to help you run the numbers and make a choice that fits your future. Let’s talk.