The core difference between a fixed-rate mortgage and an adjustable-rate mortgage is right in the names: one locks your interest rate for the life of the loan, the other doesn't. * A fixed-rate mortgage sets your interest rate the day you close, and it never changes — not in year 1, not in year 30. That means your principal-and-interest payment stays the same size every single month for the entire loan term, which makes budgeting predictable regardless of what happens to interest rates in the broader economy afterward. * An adjustable-rate mortgage, or ARM, starts with a fixed introductory period — commonly 3, 5, 7, or 10 years — during which the rate doesn't move. After that period ends, the rate adjusts periodically, often every six months or once a year, based on a financial index (frequently the Secured Overnight Financing Rate) plus a margin set by your lender. * The appeal of an ARM is usually a lower starting rate than a comparable fixed-rate loan, which can mean a lower payment during those introductory years, or qualifying for a larger loan amount than a fixed-rate mortgage would allow. The tradeoff is uncertainty: once the adjustment period begins, your payment can rise — sometimes significantly — if broader interest rates have climbed since you closed. * Most ARMs build in some protection against runaway increases through rate caps, which limit how much the rate can jump at each adjustment and over the life of the loan. Still, the fundamental tradeoff doesn't disappear: fixed-rate loans trade a potentially higher starting rate for total predictability, while ARMs trade lower initial costs for real payment uncertainty down the road.