Fixed-Rate vs. Adjustable-Rate Mortgages (Which Is Better?)
Choosing between a fixed-rate vs. adjustable-rate mortgage is one of the biggest decisions you will make when financing a home. A fixed-rate mortgage offers stability with an interest rate that never changes, while an adjustable-rate mortgage (ARM) often starts with a lower rate that can go up or down over time.
In this guide, we’ll compare the pros and cons of both options for 2026. We’ll show you how each choice impacts your monthly budget and why your long-term plans should dictate your decision. Understanding these loan types is essential for mastering how mortgage payments are calculated.
Fixed-Rate Mortgages: The Safety Net
A fixed-rate mortgage is exactly what it sounds like: your interest rate is “locked in” for the entire life of the loan, whether that is 15 or 30 years. This means your principal and interest payment will never change, no matter what happens in the economy.
This predictability makes it easy to understand how amortization works for your budget. You’ll know today exactly what your final payment will be 20 years from now. For many families, this peace of mind is worth a slightly higher starting interest rate.
Quick Tip: Fixed-rate mortgages are perfect for buyers who plan to stay in their home for a long time (7+ years) and want to avoid the risk of rising interest rates.
Takeaway: The fixed-rate mortgage is the gold standard for long-term stability and stress-free budgeting.
Adjustable-Rate Mortgages (ARM): The Low-Start Option
An Adjustable-Rate Mortgage usually starts with a “teaser” rate that is lower than a fixed-rate loan. This low rate lasts for a set period, such as 5, 7, or 10 years. After that period ends, the rate “adjusts” based on current market conditions.
If interest rates go up in the future, your monthly payment will increase—sometimes significantly. However, if you plan to sell the home or refinance before the adjustment period starts, an ARM can save you thousands of dollars in the early years. You can see how a lower starting rate changes your bill on our Home Page Calculator.
Takeaway: ARMs offer lower initial payments but come with the risk of your payment “resetting” to a much higher amount later.
Side-by-Side Comparison
To help you choose between a fixed-rate vs. adjustable-rate mortgage, here is how they stack up against each other:
| Feature | Fixed-Rate Mortgage | Adjustable-Rate (ARM) |
|---|---|---|
| Interest Rate | Never Changes | Changes periodically |
| Monthly Payment | Predictable | Can increase or decrease |
| Initial Rate | Slightly higher | Usually lower |
| Best For… | Long-term residents | Short-term owners (5-7 years) |
Choosing the right term also matters. You can see how the math shifts in our guide on how loan term affects monthly payments. For more information about our team’s mission, visit our About Us page.
Frequently Asked Questions (FAQ)
The first number (5) is the number of years your initial low interest rate is locked. The second number (1) means the rate can adjust once every year after that initial 5-year period is over. This is one of the most common types of adjustable-rate loans.
Yes, but you have to “Refinance.” Many people take an ARM to save money now, with the goal of refinancing into a fixed-rate loan before the adjustment period begins. This can be a smart strategy if you believe rates will drop in the future.
Technically, yes. If market interest rates drop, your ARM rate could adjust downward. However, most people get an ARM for the initial low rate, which is already below market averages, so a further decrease is less common than an increase.
Need help comparing your loan options? Contact us if you have questions here.