Definition
A mortgage whose interest rate changes periodically according to an index plus a margin, after an initial fixed period.
Example
A 7/6 ARM holds its rate fixed for seven years, then adjusts every six months subject to caps.
Related terms
- Acceleration Clause
- Accrued Interest
- Adjustable Rate Cap
- Amortization
- Annual Percentage Rate
- Assumable Mortgage
Frequently asked questions
What does Adjustable-Rate Mortgage mean in real estate?
A mortgage whose interest rate changes periodically according to an index plus a margin, after an initial fixed period.
How is Adjustable-Rate Mortgage used in practice?
A 7/6 ARM holds its rate fixed for seven years, then adjusts every six months subject to caps.
This definition is provided for educational purposes. Legal and tax terminology can carry jurisdiction-specific meaning — confirm with a licensed professional before relying on it in a transaction.