Option ARM vs. Fixed Rate Mortgage Overview
There are two main types of mortgages: adjustable rate mortgages (ARMs) and fixed rate mortgages. One type of adjustable rate mortgage is an option ARM. Typically, an option ARM has a low introductory interest rate that is fixed for a short period of time, perhaps one or three months. This means that your monthly mortgage payments will be fixed for this same one- or three-month period. Since the interest rate on an option ARM is generally much lower than a fixed rate mortgage, the monthly mortgage payments on option ARMs are usually much lower as well.