When purchasing a home with an adjustable-rate mortgage (ARM), how will the monthly payment be affected?

When purchasing a home with an adjustable-rate mortgage (ARM), the structure of the loan allows for interest rate fluctuations that directly impact the monthly payment. With an ARM, the interest rate is typically fixed for an initial period, after which it adjusts periodically based on a specified benchmark or index. This means that as interest rates fluctuate—whether they increase or decrease—the monthly payments will also adjust accordingly.

Therefore, the correct answer highlights that the monthly payment will vary based on these fluctuations in interest rates, making it crucial for borrowers to understand potential changes in their payment obligations throughout the term of the loan.

In contrast, a constant monthly payment, a decrease over time, or limitations on increases after a specific period do not accurately reflect how ARMs function, as they are inherently designed to adjust with changes in interest rates. Understanding this dynamic is essential for homebuyers to effectively manage their financial planning with an ARM.