It is the option we recommend if you plan to sell your home within 2 or 5 years. An adjustable-rate mortgage has an introductory interest rate that lasts a set period of time and adjusts annually thereafter for the remaining time period of a total of 30 years. After the set period, your interest rate will change and so will your monthly payment.

To protect borrowers adjustable-rate mortgages place a cap on potential interest rates. This keeps the margin between the initial fixed rate and the adjustable rate reasonable. Interest rate caps are the maximum amount that a rate can rise per adjustment period as well as over the entire loan term. Interest rate caps provide a reasonable expectation of how much monthly payments an increase.

Adjustable-rate mortgages offer their own set of pros and cons. On the pro-side, ARM loans offer a lower rate during the initial period.
After the initial rate period if the index rate drops your interest rate also decreases and there are rate caps to prevent the rate from raising too high during index rate increases. The loans are a good choice for borrowers looking to relocate or pay off the loan quickly.
On the con-side, after the introductory period, increases in the index rates can lead to higher monthly payments.