Investor Glossary-armInvestor Glossary-armInvestor Glossary-armInvestor Glossary-armInsightful stock market charts - Click here
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z


The HTML to link to this page

An ARM is an acronym standing for adjustable-rate mortgage, a loan instrument commonly offered on residential properties. Unlike with fixed-rate mortgages, the interest rate on an ARM loan is tied to an index and may rise and fall accordingly. The 11th District Cost of Funds Index (COFI), the 12-month Moving Treasury Average (MTA), the 12-month Treasury Bill index (T-Bill), and the London Interbank Offered Rate (LIBOR) are among the indexes used as a benchmark/base rate for ARM loans. The initial mortgage and rate on an ARM can remain in effect for a period ranging from one month to seven years or more, after which it adjusts to the indexed rate plus any margin. This interval is called the adjustment period; the rate and payment adjusts after one year on a 1-year ARM and after three years on a 3-year ARM. Lenders typically add a margin of fixed percentage points to the benchmark rate of an ARM which is often based on the borrower's credit record. For example, if the indexed rate is 3% and the margin is 4%, the borrower pays a full rate of 7% on their ARM. Interest rate caps may be applied in an effort to prevent the rate on an ARM from exceeding a specified limit. The hybrid ARM, a popular variation on the ARM, has a fixed rate of 3 to 10 years and is pegged to an index thereafter. Other variations of ARM include the interest-only ARM (I-O ARM) and the payment-option ARM.

Rate this ARM definition...

Learn about investing with the Investor Glossary Term of the Day

Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.

Popular Terms: APR, required rate of return, in escrow, per diem, stock split, cancelled check, labor relations, liquidity ratio, inflation, 401a, limit order, risk management, Key Rate Duration, retained earnings, FICO score, quality assurance, 144a, real GDP, command economy, dividends payable, deferred revenue, class C shares, stock market close, deferred tax, balance sheet, reverse mortgage, phantom income, ex-dividend, option premium, LIBOR, annual return, debt service coverage, open position, 1035 exchange, current ratio, EBITDA, implied volatility, average price per share, wholly-owned subsidiary, Zero Cost Collar, irrevocable trust, ex-dividend date, FTSE, diluted share, covered put, minority interest, VIX, 1031 exchange, margin rate

Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Home | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use