What is Adjustable Rate Mortgage Definition?

by Maria John Senior Mortgage Executive

Anadjustable-rate mortgage (ARM) is a loan term in mortgage loan in which the interest rates that can change periodically after the initial fixed-rate period.

In adjustable rate mortgage you will pay the lower interest rate for a fixed time period after that arm mortgage rate will increase by mortgage lender formula.

What is an ARM loan?
An arm loan is expressed by two numbers, the first number indicates the length of time the fixed-rate is applied to the loan but there is no formula to define what the second number indicates.

An ARM loan might be the right option for you if you plan on moving within 7 years since they feature lower introductory interest rates. If interest rates are expected to fall, a homeowner could potentially reduce their monthly payments with the lowered interest rates.

If you’re considering an arm mortgage rates, you can compare different types of ARMs using our mortgage calculator.

Reference: https://medium.com/@semfairway/what-is-adjustable-rate-mortgage-definition-9ce4f27e668c