What best describes an "adjustable-rate mortgage"?

An adjustable-rate mortgage is characterized by its interest rates that fluctuate in accordance with market conditions. This means that over the life of the loan, the interest rate can change after an initial period, impacting the monthly payment amounts that the borrower must make. Typically, these mortgages begin with a lower fixed interest rate for a set period, after which the rate adjusts at regular intervals based on an index, which can result in either an increase or decrease in the payment amounts depending on economic conditions. This feature allows borrowers to potentially benefit from lower initial payments, although it also carries the risk of higher payments if interest rates rise.

The other options do not accurately describe an adjustable-rate mortgage, as they either describe fixed-rate mortgages or loans with different terms that do not apply to adjustable-rate configurations.