Fixed Rate vs Adjustable Rate: Which Is Better?

A fixed-rate mortgage locks in your interest rate for the entire life of the loan, giving you predictable monthly payments that never change. An adjustable-rate mortgage, or ARM, offers a lower initial rate for a set period, typically 5, 7, or 10 years, after which the rate adjusts periodically based on market conditions. Fixed rates are ideal if you plan to stay in the home long-term and want payment stability. ARMs can be a smart choice if you plan to sell or refinance before the adjustable period begins, since you benefit from the lower initial rate without the risk of future increases.