What is the primary difference between a fixed-rate mortgage and an adjustable-rate mortgage?

The primary difference between a fixed-rate mortgage and an adjustable-rate mortgage lies in the interest rate stability over the life of the loan. In a fixed-rate mortgage, the interest rate remains constant throughout the entire duration of the loan. This predictability allows borrowers to plan their budgets effectively since their monthly payments will not change, regardless of market fluctuations.

In contrast, an adjustable-rate mortgage features an interest rate that can vary after an initial fixed period. This means that a borrower’s monthly payment could increase or decrease based on changes in the market interest rates after that initial period ends. Therefore, the fixed-rate mortgage’s characteristic of having a constant interest rate is indeed what sets it apart from an adjustable-rate mortgage, making the choice about fixed-rate mortgages the correct response.