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What is an Adjustable-Rate Mortgage (ARM)?

Adjustable-Rate Mortgage (ARM) is a home loan where the interest rate changes periodically based on market conditions after an initial fixed-rate period.

How an ARM Works

  • Starts with a fixed interest rate for a limited period
  • Interest rate adjusts at scheduled intervals afterward
  • Monthly payments may increase or decrease over time
  • Linked to market benchmark interest rates

Why Borrowers Choose ARMs

  • Lower initial interest rates compared to fixed loans
  • Suitable for short-term homeowners or investors
  • Can reduce early loan repayment burden
  • Offers flexibility in changing interest rate environments

Adjustable-rate mortgages can provide lower initial borrowing costs and flexible financing options. However, borrowers should carefully assess future interest rate risks before choosing an ARM.

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