Adjustable rate mortgages, or ARM, is much different from a traditional fixed rate mortgage because the interest rate fluctuates during the life of the loan in accordance with movements in the index rate. Adjustable rate mortgages generally have lower initial interest rates than fixed rate mortgages and can end up saving you a substantial sum if rates are to remain steady or drop. On the other hand, when financial markets are unstable, adjustable rate mortgages can increase with little notice.

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