How does it work and does it make sense using it now with the rates are very high.
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It means adjustable rate mortgage. Instead of a locked in interest rate for the entire 30 years, you get a 5-year, 7-year ARM, meaning your rate is locked for that period of time, after which is adjusts annually based on current rates.
Often ARM rates are enough lower than 30-year that it makes sense to gamble it won’t adjust shy high down the road — especially if you’re buying a condo or starter home you only expect to own for 5-7 years. For a few years there, 30-year were such low rates there was no real benefit to the ARMs. Now, it might again be worth exploring.
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