Adjustable-rate mortgages typically have a lower interest rate that may go up or down after the initial term. Typically, the interest rate under an ARM will stay the same for five, seven or 10 years and then adjust annually after that. The rates are lower initially, so they appeal to people who know they will move and sell the house before the end of the fixed rate period. Most Americans buy a new house every 5 to 10 years, as their family grows or their job changes, so paying the higher rate on a 30 year fixed product could be a waste, if you will sell the house much sooner. Sometimes an ARM is an interesting option for someone on a career path that will provide more income in a few years. Sometimes it is easier to purchase a house with an ARM and then refinance into a 30 year product a year or two later. Bottom line: ARMs are cheaper and often popular for buyers who plan on refinancing and for borrowers planning to sell their home or fully pay off their loan in the near future.