How do fixed and adjustable mortgage rates differ?

In a fixedrate mortgage, the interest rate remains the same for the entire term of the loan, which is typically 15 or 30 years. This means that your monthly payment will also remain the same, which can make budgeting easier. Fixedrate mortgages are a good option if you plan to stay in your home for a long time and want the certainty of a stable monthly payment.

On the other hand, an adjustablerate mortgage (ARM) has an interest rate that can fluctuate based on changes in the market. Typically, the rate will remain fixed for a certain period of time, such as 5 or 7 years, and then adjust annually based on a predetermined index. The initial rate on an ARM is typically lower than a fixedrate mortgage, which can make it an attractive option for buyers who plan to move or refinance within a few years. However, it's important to consider the potential for your payments to increase in the future if interest rates rise.