4/1 adjustable-rate mortgage (ARM)
A 4/1 adjustable-rate mortgage (ARM) is a type of home loan where the interest rate is fixed for the first four years. After this initial period, the rate adjusts annually based on market conditions. This means that monthly payments can change after the first four years, potentially increasing or decreasing.
This mortgage option is often appealing to buyers who plan to sell or refinance before the adjustable period begins. However, it carries the risk of higher payments in the future if interest rates rise. Understanding the terms and potential changes is crucial for borrowers considering this type of loan.