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

If the prime rate changes, the interest part of the mortgage will automatically alter, adjusting greater or lower based on whether rates have increased or decreased. This means you could right away face greater home loan payments if interest rates increase and lower payments if rates decrease.

ARM vs VRM: Key Differences

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

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