A fixed-rate mortgage locks your interest rate for the entire loan term. Your principal and interest payment never change, providing predictability and peace of mind.
An adjustable-rate mortgage starts with a lower rate for an initial period (5, 7, or 10 years), then adjusts periodically. A 5/1 ARM at 5.5% can save $250/month vs a 30-year fixed at 6.5%.
The risk is rate increases after the fixed period, which can raise payments significantly.