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. After a set period, usually a few years, the interest rate adjusts periodically based on market conditions, which can lead to lower or higher monthly payments. Borrowers with an ARM should be aware of the potential for increased payments as rates rise. These loans typically have caps that limit how much the interest rate can increase at each adjustment and over the life of the loan, providing some protection against drastic changes.