What’s the difference between an adjustable-rate mortgage (ARM) and a fixed-rate mortgage?

Both types of mortgages start out with fixed rates but then they take different paths to get to the finish line, (What finish line, you ask? The day you’re mortgage-free and own your home outright!)

Here’s how it works. An adjustable-rate mortgage offers you a low, fixed rate at the beginning of your term. Let’s say, for the first five or ten years. During this time, you get a lower monthly payment so you can build resources for when your rate (and monthly payment) starts adjusting.

On the other hand (of your ARM!), a fixed-rate mortgage offers the same rate through the life of your loan so your monthly payments are always the same, too.