Why is an adjustable rate mortgage (ARM) a bad idea?

An adjustable-rate mortgage (ARM) can be a bad idea because it exposes borrowers to fluctuating interest rates, which can lead to significantly higher monthly payments over time if rates rise. This uncertainty can make budgeting difficult and may result in financial strain. Additionally, many borrowers may underestimate their ability to refinance or sell before the rate adjusts, potentially putting them at risk of foreclosure if they can’t afford the increased payments.