What's the difference between an ARM and a fixed-rate mortgage?

A fixed-rate mortgage keeps the same interest rate and principal-and-interest payment for the entire term, giving you certainty. An adjustable-rate mortgage (ARM) starts with a lower fixed rate for an intro period – like the 5 in a 5/6 ARM means five years fixed – then adjusts periodically based on an index plus a margin, within caps that limit how much it can jump. ARMs can save money if you're confident you'll sell or refinance before the fixed period ends. The risk is staying in the loan when rates rise and your payment climbs. Check the caps (initial, periodic, and lifetime) so you know the worst-case payment. For most long-term owners, a fixed rate's predictability is worth more than the early ARM discount.