What distinguishes fixed-rate mortgages from adjustable-rate mortgages?

Fixed-rate mortgages are characterized by having a constant interest rate throughout the entire term of the loan. This means that the monthly mortgage payment, which includes principal and interest, remains the same for the duration of the loan, providing borrowers with predictability and stability in their budgeting. In contrast, adjustable-rate mortgages (ARMs) typically start with a lower interest rate that can change at specified intervals based on market conditions, which creates uncertainty in future payments.

The stability offered by fixed-rate mortgages is particularly appealing to borrowers who prioritize consistent monthly payments and want to avoid fluctuations in interest rates that could significantly affect their financial planning. This is a fundamental distinction that defines the nature of fixed-rate versus adjustable-rate mortgages.

The other options either provide misleading information or do not accurately reflect key differences. For example, while fixed-rate mortgages may be common, that aspect does not define their characteristics compared to adjustable-rate mortgages. Similarly, adjustable-rate mortgages may or may not require a down payment, depending on the lender's terms, and while fixed-rate mortgages might appear to be more expensive over time in some scenarios, they are not always cheaper, as market fluctuations can impact the overall cost of loans.