An adjustable-rate mortgage (ARM) is a kind of variable home mortgage that sees home loan payments change going up or down based on changes to the loan provider's prime rate. The principal part of the home loan remains the same throughout the term, maintaining your amortization schedule.

If the prime rate changes, the interest part of the home loan will immediately change, adjusting higher or lower based upon whether rates have increased or decreased. This means you might immediately deal with higher mortgage payments if rate of interest increase and lower payments if rates decrease.

ARM vs VRM: Key Differences

ARM and VRMs share some resemblances: when rate of interest alter, so will the home mortgage payment's interest part. However, the essential distinctions lie in how the payments are structured.

With both VRMs and ARMs, the rates of interest will alter when the prime rate modifications