Fixed-Rate Mortgage Vs. Adjustable-Rate Mortgage: What's The Difference?

For certain people in the homebuying market, and for people who choose to read about and otherwise follow the real estate market in the United States, different mortgage types reflect different aspirations. For some people, different mortgage types inspire their conceptual exploration and financial focus. For these purposes though, two mortgage types may prove to be of particular interest: mortgages with a fixed interest rate and mortgages with an adjustable interest rate.

For fixed-rate mortgage holders, these home-buyers can expect for their home loan to come with a locked-in, unchanging interest rate. Per the terms, this fixed interest rate will last for the duration of the home loan, as Investopedia reported. Of course, as a concept, fixed means something stable that is not subject to fluctuation (via Merriam-Webster). Buyers who prefer certainty may find these mortgages most appealing since fixed-rate mortgage holders can expect to pay a consistent mortgage amount each month.

Another mortgage option, though, is an adjustable-rate mortgage. While fixed-rate mortgages are known (and appreciated by many home loan buyers) for their economic certainty, the adjustable-rate mortgage can appeal to a home buyer with different aspirations and expectations. This mortgage type provides that the home loan comes with an interest rate that may fluctuate. Because of this fluctuation, adjustable-rate mortgages can be more volatile for purchasers. Adjustable-rate mortgages may also be considered floating mortgages, as Investopedia explored.

In 2022 for the first time in more than 10 years, mortgage rates exceeded 5%, as The Washington Post reported. The publication noted that this increase in mortgage rates is helping to tame a domestic housing boom. As Nerd Wallet explained, current mortgage rates apply to 30-year fixed rates, as opposed to adjustable rates. The financial publication further reported a 4.9% rate for 20-year fixed-rate mortgages and a 4.16% rate for 15-year fixed-rate mortgages.