Mortgage glossary
Adjustable-rate mortgage (ARM)
Definition: An adjustable-rate mortgage (ARM) is a home loan whose interest rate stays fixed for an initial period, then adjusts at set intervals based on a market index plus a margin.
An ARM is usually named by its structure. A 7/6 ARM, for example, holds its starting rate for seven years and then adjusts every six months. Caps limit how much the rate can move at the first adjustment, at each later adjustment, and over the life of the loan.
ARMs can make sense for borrowers who expect to sell or refinance before the fixed period ends, or who want a lower starting rate on a large loan. The tradeoff is uncertainty: the payment can rise after the fixed period. Our jumbo options include 5/6, 7/6 and 10/6 ARMs, and FHA and VA 5/1 ARMs are also available.
Related terms
Reviewed by Kyle Richardson, NMLS #863464. General information, not advice for your specific situation. All glossary terms
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