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What is the difference between a fixed-rate loan and an adjustable-rate loan (ARM)?

April 26, 2017adjustable-rate arm difference fixed-rate loan

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What is the difference between a fixed-rate loan and an adjustable-rate loan (ARM)?

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The terms fixed-rate mortgages and adjustable-rate mortgages refer to the mortgage interest rate on a loan. A fixed-rate mortgage maintains the same loan interest rate during the term of the mortgage or loan. An adjustable-rate mortgage (ARM) loan has an interest rate, that can be raised or lowered over time, based on periodic changes in a monitored index. While the monthly mortgage payments that you make with a fixed-rate mortgage are comparatively constant, payments on an ARM loan are likely to vary. There are advantages and disadvantages to each type of mortgage based on your unique buying circumstances.