Fixed Rate Cannot Be Changed

• A fixed interest rate is exactly what is sounds like: a rate that can never be changed over the term of the loan, whether it's 15 or 30 years. Conversely, an adjustable rate can rise or fall over the lifetime of the loan. An adjustable rate is also called a variable rate.
  
  

Adjustable Rate Caps Lower Risk

• A fixed interest rate may be higher at the outset than an adjustable rate, but the fixed rate involves less risk since it can never be changed. If interest rates move higher in the general economy, an adjustable rate can rise quickly; that means the payment on the mortgage can rise quickly as well. Adjustable rates are typically subject to caps that contain the risk, but only to some extent.
  
  

Fixed and Adjustable Rate

• Some borrowers choose a "hybrid" loan that combines the features of a fixed interest rate and an adjustable rate. One popular hybrid is the so-called "5/1," which has a fixed interest rate for the first five years and is then adjusted annually. This loan can be a good choice for someone who plans to move out of the home within five years.