Adjustable-Rate Mortgages
What goes up, must come down. And that's basically the principal of ARMs. The interest rate you pay is adjusted from time to time to keep it in line with changing market rates. This means when interest rates go up, your monthly home loan payments may go up. And, when interest rates go down, your monthly home loan payments may go down.

ARMs are great because they offer start rates that are lower than the interest rates of fixed rate home loans. This typically enables you to begin with lower monthly payments and qualify for a larger loan. If you're worried by the thought of your payment going up soon, or if you know exactly when you'll be ready to move to a new home, you might want to look into an ARM that protects you against the possibility of rapid interest rate increases for a set number of years.

Balloon Mortgage - mortgage with principal and interest payments that do not fully repay the loan. The balance is due at the end of the balloon term. Available with a variety of terms

Fixed period ARM starts with a lower rate than standard fixed rate loans. Your rate then stays the same for the first 3, 5, 7 or 10 years, depending on the fixed period ARM you choose. At the end of that period, your interest rate adjusts every year like a regular ARM according to a financial index (that's why some lenders call them 3/1, 5/1, 7/1 and 10/1 ARMs.

1 Year ARM
The one-year ARM interest rate and monthly payment is adjusted every 12 months from the beginning of the loan term.

3/1 ARM
The 3/1 ARM has an initial fixed rate period of three years. Thereafter, the interest rate and monthly payment then adjusts every six months.

5/1 ARM
The 5/1 ARM has an initial fixed rate period of five years. Thereafter, the interest rate and monthly payment then adjusts every six months.

7/1 ARM
The 7/1 ARM has an initial fixed rate period of seven years. Thereafter, the interest rate and monthly payment then adjusts every six months.