Adjustable-Rate Mortgage (ARM) (ARM)
Direct definition
A mortgage with an interest rate that can change on a set schedule after an initial fixed period.
Written by the Vabasso Mortgage Editorial Team · Reviewed against agency and federal sources · Read our editorial policy for how we research and review mortgage content
Plain-English explanation
An ARM starts with a lower rate that stays fixed for a period — often 5, 7, or 10 years — then adjusts periodically based on an index plus a margin. Caps limit how much the rate can move per adjustment and over the life of the loan.
Why it matters
The lower start rate can save money if you plan to move or refinance before the fixed period ends, but payments can rise later.
Where you may see it
- Loan Estimate
- Closing Disclosure
- Mortgage statement
A real-world example
Educational and illustrative only
A common misunderstanding
An ARM's rate isn't fixed forever after the intro period, and it doesn't always rise — it moves with an index and can go down too, within its caps.
Frequently asked
Is an ARM riskier than a fixed rate?+
Payments can rise after the fixed period, which is a real risk if you'll still own the home. Caps limit how far and how fast the rate can move.
Can I refinance an ARM before it adjusts?+
Yes, as long as you qualify. Many borrowers choose an ARM planning to refinance or sell before the first adjustment.
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- Author
- Vabasso Mortgage Editorial Team
- Reviewed by
- Vabasso Mortgage Licensed Advisory Team
- Last reviewed
- July 30, 2026