There's a perfect mortgage product for every mortgage borrower. And, for some, that perfect product is the adjustable-rate mortgage (ARM).
An ARM is a mortgage which offers introductory mortgage rates -- known as "teaser rates" -- for up to the first 10 years of a loan. After the teaser period ends, the loan's mortgage rate adjusts annually to reflect current market conditions.
In exchange for accepting a mortgage rate that can change, banks offer low mortgage rates during the initial, non-adjusting period your loan.
The mortgage rate on a 5-year ARM, for example, will typically be close to 100 basis points (1.00%) less than the rate for a comparable 30-year fixed rate loan.
So, why might you choose an adjustable-rate mortgage over a fixed?