An Adjustable-Rate Mortgage (ARM) is a type of home loan where the interest rate can change over time. Initially, the rate is often lower than that of a fixed-rate mortgage, making it attractive for borrowers. However, after a set period, the rate adjusts based on market conditions, which can lead to higher monthly payments. The adjustments typically occur at regular intervals, such as annually, and are tied to a specific index, like the London Interbank Offered Rate (LIBOR). Borrowers should understand the terms of their ARM, including how often rates can change and the maximum rate increase allowed over the life of the loan.