An ARM loan is a home loan with an interest rate that adjusts throughout the life of the loan. The initial fixed-rate period is typically five, seven or 10 years. After the introductory rate term expires, the rate becomes variable for the remaining life of the loan based on an index and margin.
During the adjustable-rate period, the estimated payment and rate may change. An increase or decrease depends on the market. Market conditions at the time of conversion to the variable rate and during the adjustment period thereafter dictate your rate. A jumbo ARM loan can exceed the conforming loan limit of $766,550 and up to $1,149,825 in high-cost areas like Alaska and Hawaii.