ARM - ADJUSTABLE RATE MORTGAGE

This is a mortgage whose rate changes over time according to terms specified by the lender usually according to short-term Treasury Bill rates. It's primary benefit is that it features a Low initial interest rate, sometimes below market. The big downside is that payments may increase over time. And it can be quite risky if rates rise significantly. It is a good option for buyers whose income will rise and/or when rates are expected to drop.