Adjustable-rate mortgage

Also known as an ARM for short, an adjustable-rate mortgage is a home loan with a periodically changing interest rate. The initial rate is fixed for a certain time frame. After this period is over, the interest rate on the outstanding balance will change, typically to a market rate. Depending on the type of the ARM, the rate may change again after predetermined time intervals. This means monthly payments will also change. ARMs are a popular option for borrowers looking for a super low interest rate in the near term, especially if they expect rates to go up or down or their income to go up.