Adjustable-Rate Mortgage (ARM)
A type of mortgage in which the interest rate paid on the outstanding balance varies according to a specific benchmark. The initial interest rate is normally fixed for a period of time after which it is reset periodically, often every month. The interest rate paid by the borrower will be based on a benchmark plus an additional spread, called an ARM margin.
An adjustable rate mortgage is also known as a "variable-rate mortgage" or a "floating-rate mortgage". Investopedia Says:
Both 2/28 and 3/27 mortgages are examples of ARMs. A 2/28 mortgage's initial interest rate is fixed for a period of two years and then resets to a floating rate for the remaining 28 years of the mortgage. A 3/27 mortgage is typically the same as a 2/28 mortgage, except that the interest rate is fixed for three years and then floats for the remaining 27 years of the mortgage. Related Terms:
2/28 Adjustable Rate Mortgage - 2/28 ARM
3/27 Adjustable Rate Mortgage - 3/27 ARM
ARM Index
ARM Margin
Fixed-Rate Mortgage
Floater
Interest Rate Ceiling
Lifetime Cap
Mortgage Index
Payment Option ARM Minimum Payment |