Adjustable-Rate Mortgage (ARM)

An adjustable-rate mortgage (aka ARM) is a type of mortgage whose interest rate varies throughout the life of the loan. However, for a certain period of time at the loan's outset, the interest rate is fixed - meaning unchanging. After the period of time in which the fixed rate ends, the rate can reset periodically, often at yearly intervals. ARMs are often referred to as variable-rate mortgages or floating mortgages. The interest rate of an ARM is reset based on a benchmark or index as well as an additional spread called an ARM margin.