What is An Arm Loan?

An arm loan is an adjustable rate mortgage. An adjustable rate mortgage or arm is a mortgage with an interest rate that is fixed for a specific period of time and then adjusts either up or down on a predetermined basis according to some financial index. ARM’s were introduced as a way to make mortgages more affordable because of lower initial payments. However, they can also be risky if the interest rate adjusts upward and the borrower can no longer afford the payment.