adjustable rate mortgage

Debt Dictionary -> adjustable rate mortgage

Adjustable Rate Mortgage also known as ARM is a mortgage with interest rate that might change depending on the fluctuations in an index like the prime interest rate. The interest rate of ARM is adjusted periodically and these adjustments essentially reflect the market conditions. ARM have interest rate ceiling in order to protect the mortgagor (the mortgage loan borrower). Adjustable rate mortgages start with better rates than conventional mortgages, but they are more risky because of the possible fluctuations in interest rates in the future.