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Adjustable-rate mortgage (ARM). With this type of mortgage, interest rates change from time to time to reflect current market conditions. In many cases, the rate remains fixed for an initial period, and then it is adjusted on a yearly basis. For example, with a 31 ARM loan, the 3 in the name indicates that the loan has a fixed interest rate for the first three years.
Afterward, the rate is adjusted on a yearly basis, as indicated by the 1. Conventional mortgage. This is a mortgage loan that is issued with no government backing. A conventional mortgage might come with a fixed rate or an adjustable rate.
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