Adjustable Rates Mortgages (ARM)

An adjustable rate mortgage  has an interest rate that is fixed for the first several years of the loan (typically 3, 5, 7, or 10 years) then becomes variable for the remainder of the loan. After the initial fixed period, the ARM rate adjusts based on market conditions.

The interest rate in the early years of an ARM is usually much lower than that of a conventional fixed rate 30 year mortgage, which makes an ARM more affordable for people whose incomes are lower now than they expect them to be in a few years.

An ARM can also be advantageous for a homeowner who expects to upgrade to a larger home in less than 10 years.