Adjustable Rate Mortgage; a mortgage loan subject to changes in interest rates ; when rates change, ARM monthly payments increase
or decrease at intervals determined by the lender; the Change in
monthly -payment amount, however, is usually subject to a Cap.
ARM -- see adjustable rate mortgage.
adjustable rate mortgage (ARM) -- a loan in which the interest rate is periodically adjusted, moving higher or lower in the same ratio as a preselected index, such as Treasury bill rates. ARM loans may include caps on interest rate increases in a given time period, and over the life of the loan, and may include limits on the frequency of interest rate adjustments. ARM loans generally have initial below market interest rates in return for the borrower sharing the risk that interest rates may rise during the life of the loan.
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