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. The adjustments are typically tied to a specific index, such as the London Interbank Offered Rate (LIBOR) or the U.S. Treasury rate. Borrowers should be aware of the potential for increased payments, especially if interest rates rise significantly over time.