reference
glossary.
25 terms
definition
An Adjustable Rate Mortgage (ARM) is a home loan with an interest rate that changes periodically based on market conditions. ARMs typically start with a fixed rate for an initial period, then adjust at predetermined intervals according to a specific index plus a margin. These loans often offer lower initial rates than fixed-rate mortgages but carry the risk of rate increases over time.
examples
- —The 5/1 ARM offered a 3.5% interest rate for the first five years, then adjusted annually based on market rates.
- —Homebuyers chose an adjustable rate mortgage to qualify for a larger loan amount with the lower initial payment.
- —After three rate adjustments, the adjustable rate mortgage payment increased by $200 per month from the original amount.