When it comes to financing a home, there are different types of mortgages available to borrowers. Two of the most common types of mortgages are fixed-rate mortgages and adjustable-rate mortgages.

A fixed-rate mortgage is a mortgage where the interest rate remains the same for the entire term of the loan. This means that the borrower's monthly mortgage payment will remain the same for the life of the loan, regardless of any changes in interest rates in the market. Fixed-rate mortgages are popular among homeowners who want stability and predictability in their mortgage payments, as they provide a consistent monthly payment that makes budgeting and financial planning easier.

In contrast, an adjustable-rate mortgage (ARM) is a mortgage where the interest rate fluctuates periodically based on changes in an index, such as the prime rate. The initial interest rate on an ARM is typically lower than that of a fixed-rate mortgage, making it an attractive option for borrowers who want to take advantage of lower rates. However, the interest rate on an ARM can adjust upwards or downwards over the life of the loan, which can lead to significant changes in the borrower's monthly mortgage payment.

The main advantage of an ARM is that it allows borrowers to take advantage of lower interest rates. However, this comes with the risk of the interest rate rising and causing the monthly payment to increase. Therefore, borrowers who opt for an ARM should have a plan in place for when their interest rate adjusts and should be prepared to potentially make higher mortgage payments.

In summary, the main difference between fixed-rate mortgages and adjustable-rate mortgages is the predictability of the borrower's monthly mortgage payment. A fixed-rate mortgage provides a consistent monthly payment, while an ARM can offer lower payments initially but can fluctuate over time. Ultimately, the choice between a fixed-rate mortgage and an ARM depends on the borrower's financial goals and risk tolerance.