Adjustable Rate Mortgages (ARM)

Adjustable Rate Mortgages (ARM)s are loans whose interest rate can vary during the loan's term. These loans usually have a fixed interest rate for an initial period of time and then can adjust based on current market conditions. The initial rate on an ARM is lower than on a fixed rate mortgage which allows you to afford and hence purchase a more expensive home. Adjustable rate mortgages are usually amortized over a period of 30 years with the initial rate being fixed for anywhere from 1 month to 10 years. 


Adjustable Rate Mortgages (often called ARMs) typically last for 15 or 30 years, just like fixed rate mortgages. But during those years, the interest rate on the loan may go up or down. Monthly payments increase or decrease.  You would select this type of loan when you:

  • Plan to stay in your home less than 5 years
  • Don't mind having your monthly payment periodically change (up or down)
  • Comfortable with the risk of possible payment increases in future
  • Think your income will probably increase in the future