There are many kinds of mortgage loans available for borrowers. The most popular one in the country is the fixed rate mortgage, which gives borrowers a fixed interest rate over the course of the loan term regardless of what happens to the market rate.

There is another popular option called an adjustable rate mortgage. Adjustable rate mortgages are mortgage loans whose interest rates regularly adjust depending on a variety of indices. As a consequence, the borrower’s monthly payments may also change as time passes by. This adjusted rate is a way to transfer risk from the lender to the borrower. Unlike with fixed rate mortgages, the borrower has the potential to benefit if the interest rate falls, but has the risk of losing out if the interest rate actually rises. » Read more: Adjustable Rate Mortgage (ARM)