ARMs are long term mortgages that have periodic interest rate adjustments.
Because ARMs are generally fully amortizing loans, the monthly payments adjust accordingly with the interest rate adjustment to assure that the loan will be paid in full at the end of the loan term. Some ARMs may have an interest rate adjustment, but the monthly payment may not adjust. The difference in interest may be added to the principal loan balance. This is what is known as a negative amortizing loan. Thus, the principal balance of the loan increases rather than decreases.