Fixed against adjustable

A fixed-rate mortgage locks r for the term, so the principal-and-interest installment is the same cash figure every month. An adjustable-rate mortgage, an ARM, locks a start rate for a stated number of months and then follows an index plus a margin. Track 1 lesson 13 is that two-part rate. This lesson does not re-teach index plus spread. It names the split and shows what it does to a housing payment.

Ilex Lending writes the same $248,900 for 360 months both ways. At an illustrative fixed 5.40 percent the payment is $1,397.65 for every month of the term. The adjustable loan starts at the same 5.40 percent for 60 months, so its first sixty payments are also $1,397.65. After month 60 the rate is no longer 5.40 percent. It is whichever index-plus-margin the reset prints, inside the caps of later lessons.

For five years the two loans are cash-identical on the PI line. The difference is a calendar. The fixed loan has no reset date. The ARM has one written into the agreement: month 60, then typically every twelve months after that, a 5/1 shape. The index is a published market reference. The margin is the lender's spread. Their sum is the rate. Foundations-13 already decomposed that sum. The mortgage version is the same sum on a slower clock.

A start rate that matches a fixed rate is not a fixed rate. It is a fixed window. When the window ends, the installment is recomputed on the remaining balance at the new r for the months that are left. That arithmetic is lesson 7. This lesson is only the two shapes.

Matching payments for sixty months do not make two loans the same object. One has no reset. One has a date.