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What is an adjustable rate mortgage (A.R.M.)?

adjustable rate mortgage arm
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What is an adjustable rate mortgage (A.R.M.)?

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This is a loan in which the interest rate is adjusted periodically. The amounts and times of adjustment were agreed upon in the loan documents you executed at closing. The principal and interest payment amount is adjusted according to the rate adjustment or preset amounts in your loan documents.

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Adjustable rate mortgages (ARMs) typically start at a lower interest rate than fixed mortgages, so your monthly principal and interest payment may be lower. However, the mortgage payment for an ARM can change over time, since it continually “adjusts” to changing interest rates.

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Mortgage loans under which the interest rate is periodically adjusted to more closely coincide with current rates. The amounts and times of adjustment are agreed to at the inception of the loan.

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A type of mortgage in which the interest rate is keyed to a certain economic index and is adjusted as the index rises and falls. If you have this type of mortgage your interest rate could go up or down, depending on the prevailing rates.

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An ARM is a loan where the interest rate is adjusted periodically usually based on an index to keep your interest rate near current market rates. The amounts and times of adjustments are agreed upon in the loan documents executed at closing. Rates are tied to an index specified in the original loan documents. The principal and interest payment amount is adjusted according to the rate adjustment or preset amounts in your loan documents.

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