Adjustable Rate Mortgages (ARMs) are structured to provide lower initial interest rates that adjust periodically after an initial fixed-rate period. This means that, after the initial period, the interest rate changes at predetermined intervals—usually annually—making regulatory adjustments based on the performance of a benchmark index, such as the LIBOR or a Treasury bond yield. ARMs often come with caps that limit the amount the interest rate can increase at each adjustment period and over the life of the loan, limiting the borrower's exposure to dramatic increases in the payment amount.