Which of the following best describes adjustable-rate mortgages?

Adjustable-rate mortgages (ARMs) are characterized by their initial lower interest rates, which can change over time based on market conditions and predetermined intervals. This means that, while borrowers benefit from a lower payment at the start, their payments may increase or decrease as interest rates fluctuate following the initial fixed period.

The appeal of option B lies in its accurate representation of how adjustable-rate mortgages function. The initial lower rate can lead to significant savings in the early years of the loan, but it also introduces the potential for variability in payments down the line, depending on rate adjustments.

The other options do not accurately describe adjustable-rate mortgages. The statement that interest rates remain constant over the life of the loan refers to fixed-rate mortgages instead, which do not experience these adjustments. The claim that ARMs are only available for new home purchases is misleading, as adjustable-rate mortgages can be used for refinancing as well. Lastly, stating ARMs are less risky than fixed-rate mortgages ignores the inherent risk associated with fluctuating interest rates, which can lead to significantly higher payments if rates rise sharply.