An Adjustable Rate Mortgage (ARM) is a type of home loan where the interest rate can change over time. Initially, the rate is usually lower than that of a fixed-rate mortgage, making it attractive for borrowers. After a set period, the rate adjusts based on market conditions, which can lead to lower or higher monthly payments. ARMs typically have a fixed period, such as 5, 7, or 10 years, after which the rate adjusts periodically, often annually. Borrowers should be aware of the potential for increased payments and understand the terms, including the index and margin that determine future rates.