Adjustable-rate mortgages (ARMs) introduce a delicate balance between borrower risk and bank preference due to their potential for increased monthly payments resulting from rising interest rates. While banks favor ARMs for their low duration, borrowers face uncertainty. Currently, banking practices assume a constant interest rate throughout the mortgage term, neglecting the dynamic nature of interest rate fluctuations. This paper advocates for a novel approach: factoring in the expected interest rate trajectory when computing monthly ARM payments. Our proposed theoretical model yields a formula that fosters smoother payment profiles, enhancing financial stability. This innovation simultaneously curbs default risk associated with ARMs, preserving their desirable low duration. Through this endeavor, we contribute to a refined understanding of ARM dynamics, reconciling bank advantage with borrower security.