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

The correct answer highlights a critical feature of fixed-rate mortgages compared to adjustable-rate mortgages. Fixed-rate mortgages are designed to maintain the same interest rate throughout the life of the loan, providing borrowers with stability in their monthly payments. This predictability can be advantageous for budgeting and financial planning, as homeowners can expect their principal and interest payments to remain unchanged.

On the other hand, adjustable-rate mortgages (ARMs) typically start with a lower interest rate that can fluctuate at predetermined intervals based on a benchmark interest rate. As rates change, the borrower's monthly payment can increase or decrease, leading to potential uncertainty in future housing costs.

Understanding this distinction is essential for consumers when choosing a mortgage type, as it directly impacts their monthly payments and long-term financial planning. Other options do not accurately describe the core differences between these two mortgage types.