What are the two main types of mortgages?

The two main types of mortgages are fixed-rate and variable-rate (adjustable-rate) mortgages. Fixed-rate mortgages involve a loan with a constant interest rate and monthly payments that do not change over time. This type of mortgage offers stability and predictability, making it easier for borrowers to budget their finances. On the other hand, variable-rate (or adjustable-rate) mortgages have interest rates that can fluctuate over the life of the loan based on changes in a benchmark interest rate. This means that monthly payments can vary, which can be beneficial in a declining interest rate environment but can also pose risks if rates rise.

Understanding these two types of mortgages is essential for borrowers to make informed decisions based on their financial situations and risk preferences. The other options, while they provide valuable insights into different categories of mortgages, do not capture the primary distinction related to interest rates and how they affect borrower payments over time.