What is adjustable rate mortgage (ARM)?

If you're in the market for a home, one of the decisions you'll have to make is which type of mortgage to get.

One popular option is an adjustable rate mortgage (ARM).

An adjustable rate mortgage is a loan that has an interest rate that changes periodically, usually based on movements in the federal funds rate or Treasury bills. The lender sets a fixed interest rate for the first few years of the loan (often 3-5 years), after which time it can adjust up or down according to market conditions.

Adjustable rate mortgages offer advantages and disadvantages depending on your individual circumstances and goals when purchasing a home. Before deciding if an ARM is right for you, carefully consider all factors such as current market conditions, projected future interest rates, and how long you plan on staying in your home before making any final decisions about what type of mortgage loan to get.

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