ARM

An ARM, or Adjustable Rate Mortgage, is a type of home loan where the interest rate can change, or adjust, periodically over the term of the loan. This type of loan often starts with a lower initial interest rate that is fixed for a certain period of time, after which the interest rate adjusts based on market conditions.

In general, ARMs are appealing to borrowers because they can provide a lower initial monthly payment, as compared to a fixed-rate mortgage with the same loan amount. This lower initial payment can make it easier for borrowers to qualify for a larger loan, or to reduce their monthly housing expenses.

It's important to understand the terms and conditions of an ARM before choosing this type of loan, as the interest rate can adjust upward, potentially leading to a higher monthly payment and increased financial burden. Additionally, some ARMs have annual and lifetime interest rate caps that limit the amount the interest rate can increase, while others may not have such caps.

If you're considering an ARM, it's a good idea to carefully review the terms and conditions, including the index and margin used to determine the adjustable rate, the initial rate period and the frequency and amount of rate adjustments, as well as any interest rate caps. Additionally, you may want to consider the current and expected future market conditions that may affect the rate adjustments.