What is typically the frequency of adjustments in an Adjustable Rate Mortgage?

In an Adjustable Rate Mortgage (ARM), the frequency of adjustments is typically defined in the terms of the mortgage itself. While various ARMs exist with different adjustment schedules, the most common structure involves adjustments occurring annually. However, some ARMs might have longer initial fixed-rate periods before adjustments kick in or different terms altogether.

The option indicating adjustments every three to five years may refer to specific types of ARMs that might be tied to longer fixed-rate periods, but it doesn't represent the general structure found in most ARMs. In contrast, adjustments every month or every six months are common for more frequently adjusting loans, while annual adjustments give borrowers some stability before their rates change.

Understanding the adjustment frequency is crucial for borrowers, as it directly impacts their financial planning and payment amounts over time. Therefore, choosing the option that reflects common practice rather than specific arrangements is important.