Adjustable-Rate Mortgage (ARM)

Features

• With an adjustable-rate mortgage, your interest rate and monthly principal and interest (P&I) payments remain the same for a defined initial period, then adjust annually when that initial period is over. 
• Loans available in a variety of longer terms. 
• Includes an interest rate cap that sets a limit on how high or low your interest rate can go at each rate adjustment. 

Benefits 

• Typically an adjustable-rate mortgage has a lower initial interest rate than the rate on a fixed-rate mortgage. 
• The interest rate cap limits the maximum amount your P&I payment may increase or decrease at each interest rate adjustment and over the life of the loan. 
• May provide flexibility if you expect future income growth or if you are comfortable with an interest rate and payment that will change.

Considerations

• Monthly principal and interest payments may increase or decrease when the interest rate adjusts. 
• Your monthly principal and interest payments may change every year after the initial fixed period is over.