Loans
Adjustable-Rate Mortgage (ARM)
A mortgage where the interest rate changes periodically after an initial fixed-rate period. For example, a 5/1 ARM has a fixed rate for the first five years, then adjusts once per year based on a market index. ARMs usually start with a lower rate than fixed-rate mortgages, but your payment can go up or down when the rate adjusts. They can be a good choice if you plan to sell or refinance before the adjustable period begins.
Why It Matters
Understanding Adjustable-Rate Mortgage (ARM) is a key part of choosing the right mortgage. The type of loan you select affects your monthly payment, how much interest you pay over the life of the loan, and how much flexibility you have if your financial situation changes.
When comparing loan options, pay attention to how adjustable-rate mortgage (arm) fits into the bigger picture of your borrowing costs. A knowledgeable loan officer or mortgage broker can help you evaluate whether this option aligns with your financial goals and timeline.