An adjustable rate mortgage (ARM) is a flexible alternative to a conventional fixed-rate loan. While repaired rates remain the exact same for the life of the loan, ARM rates can alter at scheduled intervals-typically starting lower than repaired rates, which can be appealing to specific property buyers. In this short article, we'll describe how ARMs work, highlight their possible advantages, and assist you determine whether an ARM might be a great fit for your financial goals and timeline.
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What Is an Adjustable Rate Mortgage (ARM)?

An adjustable rate home mortgage (ARM) is a mortgage with an interest rate that can change in time based on market conditions. It begins with a fixed-rate period, typically 3, 5, 7, or 10 years, followed by arranged rate modifications.

The introductory rate is typically lower than an equivalent fixed-rate home mortgage, making ARM home loan rates attractive to buyers who plan to move or refinance before the modification duration begins.

After the set term, the rate adjusts-usually every 6 months or annually-based on a benchmark index plus a margin set by the lending institution. If interest rates decrease, your regular monthly payment might reduce