Glossary

Adjustable-Rate Mortgage (ARM)

An Adjustable Rate Mortgage have interest rates that fluctuate and are tied to one-year Treasury bills or a specific financial index. The intial interest rate is usually low, and then the rate bumps up between one and two points per year. There usually is a yearly cap or ceiling of two points, and the loan also has lifetime ceiling cap of a specified amount, for example six points.

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