By Ziv Shay | Updated April 2026
Compare fixed vs variable rate mortgages. See real cost differences, rate scenarios, and take our quiz to pick the right mortgage type for 2026.
| Feature | Fixed Rate Mortgage | Variable Rate Mortgage (ARM) |
|---|---|---|
| Interest Rate | Locked for entire term | Lower initial rate, adjusts periodically |
| Typical Starting Rate (2026) | 6.5-7.0% | 5.5-6.0% (1-2% lower) |
| Monthly Payment | Never changes | Can increase or decrease |
| Payment Predictability | Complete certainty | Uncertainty after initial period |
| Initial Savings | None | $100-300/mo on $400K loan |
| Risk Level | Low | Medium to High |
| Best For | Long-term homeowners | Short-term stays / rate drop expectations |
| Fixed Rate Mortgage | Variable Rate Mortgage (ARM) | |
|---|---|---|
| Starting Rate | 6.75% | 5.75% (5/1 ARM) |
| Monthly Payment (Year 1) | $2,594 | $2,334 |
| Monthly Savings (Years 1-5) | Baseline | $260/mo = $15,600 total |
| If rates rise 2% at Year 5 | Still $2,594 | $2,920 (+$586/mo) |
| If rates drop 1% at Year 5 | Still $2,594 (unless refi) | $2,134 (-$200/mo) |
The rate is fixed for the first 5 years, then adjusts once per year after that. Common ARMs include 3/1, 5/1, 7/1, and 10/1.
No. ARMs have caps: a per-adjustment cap (usually 2%), an annual cap, and a lifetime cap (usually 5-6% above the initial rate).
With rates between 6.5-7%, a fixed rate makes sense for long-term homeowners. If you expect rates to drop and plan to refinance or move within 5 years, an ARM may save money.
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