Adjustable-Rate Loans
Adjustable-rate loans, also known as variable-rate loans, usually offer a lower initial interest rate than fixed-rate loans. The interest rate fluctuates over the life of the loan based on market conditions, but the loan agreement generally sets maximum and minimum rates. When interest rates rise, generally so do your loan payments; and when interest rates fall, your monthly payments may be lowered.
Source: Federal Trade Commission
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.
Source: U.S. Department of Housing and Urban Development
A mortgage where the interest rate is not fixed, but changes during the life of the loan in line with movements in an index rate. You may also see ARMs referred to as AMLs (adjustable mortgage loans) or VRMs (variable-rate mortgages).
Source: U.S. Department of Housing and Urban Development
A variable or flexible rate mortgage with an interest rate that varies according to the financial index it is based upon. To limit the borrower's risk, the ARM may have a payment or rate cap. See also: cap.
Source: Ginnie Mae
