An ARM is an Adjustable Rate Mortgage. Unlike fixed rate mortgages that have an interest rate that remains the same for the life of the loan, the interest rate on an ARM will change periodically. The initial interest rate of an ARM is often lower than that of a fixed rate mortgage, consequently, an ARM maybe a good option to consider if you plan to own your home for only a few years; you expect an increase in future earnings; or, the prevailing interest rate for a fixed mortgage is too high.
Most homeowners get into adjustable-rate mortgages for the lower initial payment, and then plan to refinance the loan when the fixed period ends. At that time, the interest rate becomes variable, or adjustable, and the homeowner would may be able to likely refinance into another ARM, something fixed, or sell the home outright.