Conventional Adjustable-Rate Mortgage (ARM)
An adjustable rate mortgage (ARM) comes with variable interest rate based on each period’s outstanding balance on loan. ARM would yield a fixed interest rate for a period of time. After that period passed, the interest rate resets yearly or monthly and adjusts in accordance with the balance.
Consequently, payments made by the borrower may change over a time with the changing interest rate. The borrower benefits if the interest rate falls and loses out if the interest rates rise.