NMLS #2748687 · Company NMLS #2502308MBR
Short answer
A fixed-rate mortgage keeps the same interest rate and principal-and-interest payment for the whole loan. An adjustable-rate mortgage (ARM) is fixed only for its first few years, then adjusts on a schedule. An ARM can make sense if you expect to sell or refinance before the fixed period ends and could handle a higher payment if you don't. If you plan to stay for many years and want a payment that never changes, a fixed rate is usually the simpler choice.
What is the main difference between an ARM and a fixed-rate mortgage?
With a fixed rate, the interest rate on day one is the rate for the life of the loan. Your total payment can still change if property taxes or insurance in your escrow change, but principal and interest stay the same.
With an ARM, the rate is fixed for an initial period, commonly 5, 7 or 10 years. After that it resets on a schedule to an index plus a margin, within caps. The payment can go up or down at each reset. See how an ARM works.
Who might an ARM fit?
- Buyers who expect to move within the fixed period, for example for a job change or a growing household.
- Buyers of a starter home who plan to sell before the first adjustment.
- Borrowers who expect their income to rise and have savings to absorb a higher payment.
Plans change, so the question to ask is not only "will I move?" but "could I afford the highest payment if I don't?"
Who might a fixed rate fit better?
A fixed rate fits people who plan to stay a long time, want a payment they can plan around, or have a tight budget with little room for a payment increase. In New Hampshire, where property taxes are a large part of the monthly payment and can change every year, some buyers prefer to keep the loan part of the payment steady. See why NH payments change with tax bills.
How do I compare the two fairly?
Ask for a Loan Estimate for each option on the same day, with the same loan amount and points. On the ARM estimate, read the Adjustable Interest Rate table and the Projected Payments section: they show the index, margin, caps, the highest possible rate and the payment range over time. Then compare total costs over the number of years you really expect to keep the loan. See how to read a Loan Estimate.
Can I count on refinancing out of an ARM later?
Not safely. A refinance needs you to qualify again, with your income, credit and the home's value at that time, and rates then may be higher or lower than today. Treat refinancing as one option, not the plan. See what happens when the fixed period ends.
Which loan programs offer ARMs?
Conventional loans, FHA and VA all have ARM options, and many jumbo loans are ARMs. Each program has its own rules on caps and how you qualify. See FHA and VA ARMs and how lenders qualify you for an ARM.
Sources
- CFPB, Consumer Handbook on Adjustable-Rate Mortgages
- CFPB, ARM rate caps
- 12 CFR 1026.37 (Loan Estimate content)
Checked November 10, 2026. Rules and dates change, so confirm current details before you rely on them.
General information only, not tax or legal advice. Program availability, eligibility and terms vary by lender and are subject to change and to underwriting approval. Not a commitment to lend.