What distinguishes a fixed-rate mortgage from an adjustable-rate mortgage?

A fixed-rate mortgage is characterized by having a constant interest rate throughout the life of the loan. This means that the monthly principal and interest payments remain the same, providing predictability and stability for the borrower. This is particularly advantageous for long-term financial planning, as homeowners can budget their expenses knowing that their mortgage payment will not change due to fluctuations in interest rates.

In contrast, an adjustable-rate mortgage (ARM) typically has an initial period in which the interest rate is lower, but this rate adjusts periodically based on changes in an underlying index. Therefore, the payments associated with ARMs can vary over time, which introduces uncertainty about future payments.

This fundamental difference in stability and predictability is what sets fixed-rate mortgages apart from adjustable-rate mortgages.