What is the difference between "fixed-rate" and "adjustable-rate" mortgages?

The distinction between fixed-rate and adjustable-rate mortgages primarily lies in how interest rates are structured over the life of the loan. With fixed-rate mortgages, the interest rate remains constant throughout the duration of the loan, ensuring predictable monthly payments and stability for borrowers. This feature is particularly advantageous for long-term planning, as it protects borrowers from fluctuations in market interest rates.

Conversely, adjustable-rate mortgages begin with a lower, fixed interest rate for an introductory period, after which the rate can fluctuate based on market conditions and specified index rates. This means that monthly payments can vary over time, potentially increasing significantly after the initial fixed period ends.

Each type of mortgage has its merits depending on individual financial circumstances and risk tolerance; however, the essential difference is that fixed-rate loans provide stability with unchanging payments, while adjustable-rate loans introduce variability.