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Fixed-Rate vs. Adjustable-Rate Mortgage

A fixed-rate mortgage keeps your principal and interest payment the same for the life of the loan, while an adjustable-rate mortgage (ARM) may start with a lower rate that can change after the initial fixed period.

Check Today's RateHow each option works
  • Fixed: steady principal and interest
  • ARM: rate can adjust later
  • Compare side by side

The basics

Which mortgage rate type fits you?

The biggest difference between a fixed-rate mortgage and an ARM is what happens to your rate over time. A fixed rate never changes, so your principal and interest payment stays predictable. An ARM starts with a fixed rate for a set number of years, then adjusts with the market within limits set by rate caps. The right choice depends on how long you plan to stay in the home and how comfortable you are with a payment that could change.

Fixed rate
Same P&I payment
ARM
Rate can adjust
Common terms
15 or 30 years
Homeowner working out monthly payments with a calculator and notebook

How it works

Choosing your rate type in four steps

A licensed loan officer walks you through both options so you can decide with the full picture.

  1. 01

    Share your plans

    Tell your loan officer how long you expect to stay in the home and what monthly payment feels comfortable.

  2. 02

    Compare both options

    Review fixed-rate and ARM loan estimates side by side, including how an ARM's payment could change after the fixed period.

  3. 03

    Choose and apply

    Pick the rate type that fits your goals, then submit your application and documents for underwriting.

  4. 04

    Close and get your keys

    Review your Closing Disclosure, including your rate terms, then sign and move in.

Side by side

How Fixed and ARM Loans Work

How each rate type behaves over the life of your loan.

Fixed-Rate Mortgage

A fixed-rate mortgage keeps the same interest rate for the life of the loan, so your principal and interest payment never changes. The most common terms are the 30-year fixed and the 15-year fixed. A 15-year fixed often comes with a lower rate but a higher monthly payment, while a 30-year fixed spreads payments over a longer term for a lower monthly payment. Your rate stays the same unless you refinance or modify the loan.

Best if you want

A payment that stays predictable, especially if you plan to stay in the home for many years.

Adjustable-Rate Mortgage (ARM)

An adjustable-rate mortgage (ARM) has a fixed rate for an initial fixed period, then adjusts based on a market index. For example, a 5/6 ARM is fixed for 5 years and a 7/6 ARM for 7 years, then the rate adjusts every 6 months, within limits set by rate caps. An ARM may offer a lower initial rate and payment, but your payment can rise once the adjustable period begins.

May suit you if

You expect to move or refinance before the fixed period ends and can handle a payment that may rise.

Fixed vs. adjustable rate FAQs

  • A fixed-rate mortgage keeps the same interest rate for the life of the loan. An adjustable-rate mortgage (ARM) has a fixed rate for an initial period, then adjusts periodically based on an index plus a margin.

  • The first number is how many years the starting rate is fixed. The second shows how often the rate can adjust afterward, such as every six months or once a year.

  • Often at the start, but not always. An ARM's initial rate is frequently lower than a comparable fixed rate, but it can rise after the fixed period ends.

  • ARMs have rate caps that limit how much the rate can change at the first adjustment, at each later adjustment and over the life of the loan. Your Loan Estimate shows these limits.

  • An ARM may make sense if you expect to sell or refinance before the fixed period ends and can handle a higher payment if rates rise. A fixed rate suits buyers who want a predictable payment.

  • Yes, if you qualify at the time. Refinancing has closing costs and depends on your credit, equity and market rates, so it is not guaranteed.

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