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".

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.


Investment dictionary. . 2012.

Look at other dictionaries:

  • adjustable rate mortgage — UK US noun [C] FINANCE, PROPERTY ► VARIABLE RATE MORTGAGE(Cf. ↑variable rate mortgage) …   Financial and business terms

  • adjustable rate mortgage — noun Date: 1981 a mortgage having an interest rate which is usually initially lower than that of a mortgage with a fixed rate but is adjusted periodically according to the cost of funds to the lender …   New Collegiate Dictionary

  • Adjustable Rate Mortgage — Eine Hypothek (von griechisch: ὑποθήκη „Unterpfand“) berechtigt den Hypothekengläubiger (Hypothekar) sich aus demjenigen Erlös, der sich durch Zwangsversteigerung oder Zwangsverwaltung des durch die Hypothek belasteten Grundstücks erzielen lässt …   Deutsch Wikipedia

  • hybrid adjustable rate mortgage — An adjustable rate mortgage that starts with a fixed interest rate for a set term (such as five, seven, or ten years), after which the rate can adjust. Category: Real Estate & Rental Property Nolo’s Plain English Law Dictionary. Gerald N. Hill,… …   Law dictionary

  • Lehman Brothers Adjustable-Rate Mortgage Index — A benchmark index that includes all agency guaranteed securities with coupons that periodically adjust based on a spread over a published index. Bloomberg Financial Dictionary …   Financial and business terms

  • adjustable rate — Applies mainly to convertible securities ( convertible security). Refers to interest rate or dividend that is adjusted periodically, usually according to a standard market rate outside the control of the bank or savings institution, such as that… …   Financial and business terms

  • adjustable-rate — [ə just′ə bəl rāt′] adj. designating or of a debt obligation, esp. a mortgage on real property, having terms which allow the interest rate to change over time * * * …   Universalium

  • adjustable-rate — [ə just′ə bəl rāt′] adj. designating or of a debt obligation, esp. a mortgage on real property, having terms which allow the interest rate to change over time …   English World dictionary

  • adjustable-rate — adj. Adjustable rate is used with these nouns: ↑loan, ↑mortgage …   Collocations dictionary

  • Fixed-Rate Mortgage — A mortgage that has a fixed interest rate for the entire term of the loan. The distinguishing factor of a fixed rate mortgage is that the interest rate over every time period of the mortgage is known at the time the mortgage is originated. The… …   Investment dictionary

  • variable rate mortgage — noun : adjustable rate mortgage herein * * * variable rate mortgage, U.S. a mortgage on which the interest rate rises or falls with the interest rate in the money market: »Variable rate mortgages…[fluctuate], depending on such factors as the long …   Useful english dictionary

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