What is a common disadvantage of adjustable-rate mortgages (ARMs)?

One of the primary disadvantages of adjustable-rate mortgages (ARMs) is that rate adjustments can lead to significant increases in monthly payments. With an ARM, the interest rate is typically fixed for an initial period, after which it adjusts based on a specific index and margin. When interest rates rise, borrowers may find themselves facing much higher payments than initially projected. This unpredictability can affect budgeting and financial planning, making it a serious consideration for homeowners.

The other options do not represent common disadvantages of ARMs. For instance, while lower initial interest rates may be seen as an advantage rather than a disadvantage, the concern about qualifying for ARMs compared to fixed-rate mortgages varies by lender and does not represent a consistent drawback. Additionally, ARMs are available to first-time homebuyers, contrary to the implication that they are not.