ARM - When does the rate change?
ARMs have a specific length of time between interest rate adjustments. In times of falling interest rates, a shorter period benefits the borrower. The opposite is true in times of rising interest rates as a longer period benefits the borrower.
Caps exist on ARMs to determine the frequency with which rates can change (ex: Adjustments may be made only once per year).
Caps also determine the amount the rates can change percentage wise in specific periods (ex: Interest may only adjust by maximum of 1% every 12 months).