The interest rate on this loan will be fixed for a stated period of time and will then become adjustable for the remainder of the loan. For example, a 5-year fixed (30-year) loan would have a fixed interest rate for the first five years and then convert to an adjustable rate for the remaining 25 years.
Adjustable rate loans have more risk due to the possibility that the interest rate could increase. However, because you are assuming the additional risk the lender will generally reward you with a lower interest rate and monthly payment during the initial fixed interest period.
These loans are of particular benefit to borrowers that plan to either sell the property or refinance before reaching the adjustable period. Mortgage300 offers several ARM programs with fixed interest ranging from 1-year to 10-year terms.