Which type of loan has rates that adjust after consummation?

Adjustable Rate Mortgages (ARMs) are designed to have interest rates that fluctuate over time, which occurs after the loan has been consummated. This means that once the loan is finalized, the interest rate is not fixed; instead, it adjusts at predetermined intervals based on a specific index or benchmark interest rate. The initial rate may be lower than that of fixed-rate mortgages, making ARMs appealing to some borrowers, but they carry the risk of increasing rates in the future.

In contrast, reverse mortgages, higher-priced mortgage loans, and home equity loans typically have fixed interest rates or are structured in a way that the rates remain stable for the life of the loan once established. For instance, reverse mortgages enable homeowners to access home equity without monthly payments, while higher-priced mortgage loans and home equity loans tend to have conditions that do not permit rate adjustments after consummation in the same way ARMs do.