Fixed-Rate Loans vs. ARMs
What's the difference between a fixed-rate and an adjustable-rate home loan? The interest rate on a fixed-rate mortgage is set when you take out the loan and does not change throughout the term of the loan. With an adjustable rate mortgage, the interest rate is typically fixed for the first 5, 7 or 10 years (depending on the type of the loan) and then the rate adjusts according to the market. For example, with a 5/1 ARM, your interest rate is fixed for the first five years and then adjusts.