How is an adjustable-rate mortgage different from a fixed-rate mortgage?

An adjustable-rate mortgage, also referred to as an "ARM," is a loan that provides a lower initial interest rate than most fixed-rate loans. But the interest rate can change periodically, usually in relation to an index, and in line with the type of ARM, for example: a three-year can change every three years, a 5-year would potentially change every five years, etc. When the rate changes, the monthly payment will also change.

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