Adjustable Rate Mortgage (ARM)
An adjustable-rate mortgage, or ARM, is a type of mortgage in which the interest rate applied to the outstanding balance varies throughout the life of the loan. At the end of the initial fixed-rate period, ARM interest rates will become variable which could either increase or decrease the borrower’s monthly mortgage payment.
The interest rate for an adjustable-rate mortgage changes periodically. You might start with lower monthly payments than you would with a fixed-rate mortgage, but fluctuating interest rates will likely make those monthly payments rise in the future.