Fixed vs Variable Rate Mortgage — Complete Guide
Fixed Rate Mortgage
Your interest rate stays the same for the entire term. Monthly payments never change. You know exactly what you pay every month for 15, 20, or 30 years.
Best when: Rates are low and expected to rise, you plan to stay long-term, you prefer predictable budgeting.
Variable (Adjustable) Rate Mortgage
Rate starts lower than fixed but changes with market conditions. Could go up or down. Usually has a lower initial rate for 3-5 years.
Best when: You plan to sell or refinance within 5-7 years, rates are high and expected to fall, you can handle payment increases.
Cost Comparison on $300,000 Mortgage
| Type | Rate | Monthly Payment | Total over 30 Years |
|---|---|---|---|
| Fixed 30yr | 6.5% | $1,896 | $682,633 |
| Variable (starts) | 5.5% | $1,703 | Varies |
| Fixed 15yr | 5.8% | $2,495 | $449,148 |
The 15-year fixed saves $233,485 in interest compared to 30-year, but monthly payments are $599 higher.