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Adjustable Rate Mortgage (ARM)

Adjustable Rate Mortgage (ARM)

An adjustable rate mortgage is a mortgage loan that does not have a fixed interest rate. During the life of the loan the interest rate will change, at specified periods, based on a rate that is tied to a specified index, such as the LIBORARMs come with a margin, the fixed amount over the index that your loan interest rate will change. ARMs come with a cap and a ceiling. The ceiling sets an upper limit on your interest rate over the life of the loan.  The cap sets a limit on how much your loan can adjust during any single adjustment. ARMs are also referred to as adjustable mortgage loans (AMLs) or variable-rate mortgages (VRMs).

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