Adjustable rate mortgages, or ARMs, are loan options that are the opposite of fixed rate mortgages. Whereas fixed rate mortgages have guaranteed interest rates and payment amounts throughout the entire life of the loan, ARMs have interest rates and payment amounts that fluctuate with the market.
ARMs have adjustable rate periods. This period signifies how frequently your interest rates and how much the payment amounts might potentially change. Most adjustable rate mortgages have periods of either one or three years, but others can be for longer terms.
If you have a one-year adjustable rate period, this means that you will have the same interest rate for one year. Each year, on the anniversary of your loan, your interest rate could rise or fall. With a three-year adjustable rate, your rate will only change every three years.