Fixed vs. adjustable rate mortgages, in plain English
One protects you from surprises. The other bets you'll move or refinance.
5 min read · Updated 2026-07-04
Fixed rate
The interest rate is locked for the life of the loan — usually 15 or 30 years. Payment is predictable to the penny. In a low-rate environment, you win. In a high-rate environment, you can refinance later. There is no scenario where a fixed rate goes up without your permission.
Adjustable rate (ARM)
A 5/1 ARM is fixed for the first five years, then resets every year based on an index. The starting rate is usually 0.5–1 percentage point lower than a fixed loan. That savings is real — until the reset. An ARM only makes sense if you have high confidence you will move, refinance, or pay off the loan before the reset period ends.
Key takeaways
- Fixed = predictability. ARM = a bet on the future.
- The ARM discount is real; the reset risk is also real.
- If you are not sure you will move within the intro period, take fixed.
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Educational content only. Not individualized financial, tax, or legal advice.