What does the adjustment period refer to in loan terms?

The adjustment period in loan terms specifically refers to the frequency at which the interest rate on an adjustable-rate mortgage (ARM) can change. This can have a significant impact on the borrower's payments over time, as the interest rate fluctuations can either increase or decrease the amount owed monthly. In essence, the adjustment period outlines the timeline for how long the current rate is locked in before it can be adjusted, which is a critical factor for borrowers to understand when considering their financial planning and budget in relation to the loan. Knowing the adjustment period aids in anticipating potential changes in payment and overall loan costs throughout the life of the mortgage.