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Like the fixed-rate
, an interest-only ARM requires
only monthly interest payments. Like a traditional
it often has an initial period when the interest rate is fixed,
followed by periodic adjustments. The main advantage of an
interest-only, adjustable-rate mortgage (ARM) is
its low monthly mortgage payments. The main disadvantages are that it does
not reduce the loan principal, and that the interest rate varies (often upwards)
after the initial fixed-rate period.