Fixed vs. Variable Rate Mortgages

When choosing a mortgage, one of your biggest decisions is whether the interest rate will stay the same for the entire term or change over time.

Fixed-Rate Mortgages

A fixed-rate mortgage has an interest rate set under its loan terms. Its scheduled principal-and-interest payment is generally stable unless the loan terms change. MortMe models fixed-rate scenarios.

Variable/Adjustable-Rate Mortgages (ARMs)

An ARM usually offers a lower initial fixed rate for a set period. After that, the rate adjusts periodically based on a broader market index. If market rates go up, your payment goes up. If they go down, your payment goes down.

ARMs are sometimes chosen by buyers who plan to sell the home or refinance before the initial fixed period ends.

Compare how a rate change could affect your payment with the Stress Test Calculator, then explore the trade-offs in the Scenario Lab.