Each lender may also use different adjustment periods. For example, some ARMs may be subject to adjustment every 3 or 6 months while others may be adjusted just once a year. An ARM usually carries a lower initial interest rate and lower initial monthly payment for the buyer in exchange for the buyer taking the risk that rates may rise in the future, which would mean both the rate and monthly payments will adjust upwards. A balloon mortgage has a fixed interest rate and fixed monthly payment, but after a fixed period of time, such as 5 years, the entire balance of the loan becomes due at once. Balloon mortgages are usually a last resort for those who can t qualify for a standard fixed or adjustable rate mortgage.
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