The adjustable-rate mortgage is a loan with an interest rate that is fixed for an established number of years then resets and changes up or down regularly, per the terms of the loan.
Adjustable-Rate Mortgage Loans come with interest rate floors and ceilings, referred to as caps. An Adjustable-Rate Mortgage cap protects both you and your lender. The floor protects lenders from losing money. The ceiling marks protect you from paying an unreasonable rate if the index quickly climbs.
Adjustable-Rate Mortgages benefit the borrower when the interest rate is higher than in previous years and deemed likely to drop to a more affordable level in the future.
Adjustable-rate mortgages usually start at a lower percentage rate than fixed-rate mortgages. If you plan to pay off your mortgage fast, the adjustable-rate might not have time to change.
If your job needs you to move frequently or if you plan to sell your house within a few years of purchase, rather than keeping it forever, then an Adjustable-Rate Mortgage is the perfect choice for you.
You will have the benefit of lowering rates without refinancing. You will not have to pay a new set of closing costs and fees.