ARM (Adjustable Rate Mortgage)

An Adjustable Rate Mortgage (ARM) is a type of home loan with a interest rate that changes periodically, usually tied to an economic index. Initially, it often offers a lower fixed rate for a set period, such as 5 or 7 years, providing predictable payments during that time. Afterward, the rate adjusts at regular intervals, which can increase or decrease your monthly payments based on market conditions. This flexibility can lead to savings if rates decrease, but also involves risk of higher payments if rates rise. ARMs are suitable for those planning to sell or refinance before the adjustment period.