While fixed-rate mortgages offer the same interest rate and monthly payment for the life of the loan, just as the name suggests, the interest rate and monthly payments on an ARM can change periodically. An ARM rate is set using the value of an underlying financial index, like LIBOR (London Inter-Bank Offered Rate), and adding an additional percentage, called a margin, to the index. ARM interest rates typically start lower than fixed-rates, and stay at that introductory rate for three to 10 years before they become adjustable.