What is a common characteristic of adjustable-rate mortgages?

Adjustable-rate mortgages are defined by their interest rates that fluctuate over time based on a specific index. This characteristic means that the interest rate can change at predetermined points during the life of the loan, often after an initial fixed-rate period. Typically, after the initial period, which could last a few years, the interest rate adjusts according to the performance of the index to which it is tied, which can result in lower initial payments but may increase over time as rates adjust.

The fixed interest rates associated with traditional fixed-rate mortgages do not apply to adjustable-rate mortgages, as they are designed exactly to provide variability in payments based on market conditions. Similarly, while loans that require balloon payments and those with extended terms can exist, they are not intrinsic characteristics of adjustable-rate mortgages. The essence of adjustable-rate mortgages lies in their variable interest rates, making option B the accurate description.