Adjustable Rate Mortgages (ARMs)

Adjustable Rate Mortgages (ARMs) are home loans with interest rates that can change over time, typically after an initial fixed-rate period. For example, a common ARM might have a fixed rate for the first five years, then adjust annually based on market conditions. This means your monthly payments can fluctuate, potentially becoming lower when rates drop or higher when they rise. ARMs usually start with lower rates than fixed-rate mortgages, making them attractive for some borrowers, but they carry the risk of increased payments in the future. It's important to understand these risks before choosing an ARM.