Adjustable-Rate Mortgage (ARM)

A mortgage with an interest rate that adjusts periodically based on a benchmark index. Typically starts lower than a fixed rate but carries payment risk after the initial fixed period ends.

ARMs usually open with a rate below comparable fixed loans, which lowers early payments, but after the intro period the rate floats with a benchmark index plus a margin. Rate caps limit each adjustment and the lifetime maximum, though payments can still rise sharply when rates climb.