A fixed rate never changes. An adjustable-rate mortgage starts lower for a set period, then moves with the market within caps. The question is how long you’ll keep the loan and whether you can afford the worst case.
Side by side
| Adjustable-rate (ARM) | Fixed rate | |
|---|---|---|
| Rate | Fixed for 5, 7 or 10 years, then adjusts | The same for the whole loan |
| Start rate | Usually lower | Usually higher |
| Payment risk | Can rise after the fixed period, within caps | None from the rate |
| Best for | Selling or refinancing before the fixed period ends | Staying put, or wanting certainty |
When an adjustable-rate mortgage (ARM) fits
- You expect to sell or refinance before the fixed period ends.
- You can afford the worst-case payment the caps allow.
When a fixed rate fits
- You plan to stay for many years.
- You want the payment never to change.
