In an adjustable-rate mortgage, what typically adjusts after the initial fixed period?

In an adjustable-rate mortgage (ARM), after the initial fixed period, the interest rate is the component that typically adjusts. Initially, borrowers enjoy a fixed interest rate for a predetermined time, which allows for stable and predictable payments. Once this period expires, the interest rate is recalibrated based on a specific index, which is often tied to market conditions. This adjustment can significantly affect the monthly payments because as the interest rate increases or decreases, so does the cost of borrowing.

The loan term, monthly payment, and loan amount remain consistent and do not change due to the adjustments in the interest rate. The loan term refers to the overall duration of the mortgage, the monthly payment includes both principal and interest obligations, and the loan amount is the original principal borrowed. Hence, it is the interest rate that is subject to adjustment after the fixed period in an ARM, making it the correct answer.