ARM (Adjustable-Rate Mortgage)

Mortgage with a rate that changes periodically after an initial fixed period. Common formats: 5/1, 7/1, 10/1.

An ARM has a fixed interest rate for an initial period (5, 7, or 10 years), then adjusts annually thereafter based on a published index plus a margin. Common ARMs: 5/1 (5 years fixed, then yearly adjustments), 7/1, 10/1. ARMs typically start with a lower rate than 30-year fixed loans. Rate caps limit how much the rate can change per adjustment and over the loan's life. Best for borrowers who plan to sell or refinance before the fixed period ends.