An adjustable-rate mortgage (ARM) is a type of home loan in which the interest rate can change over time based on market conditions. One of the main benefits of an ARM is that it often starts with a lower interest rate than a fixed-rate mortgage. This can lead to lower initial monthly payments, lower overall interest costs, and the ability to build equity faster than with a fixed-rate mortgage. ARM loans can offer more flexibility, as many products have caps on how much the interest rate can adjust over time or offer options to lock in a fixed rate after a certain period.
An ARM can be a great choice if you plan to move or refinance within a few years, as you may not be in the home long enough to experience significant interest rate increases.