What is Adjustable Rate Mortgage?

Question: What is Adjustable Rate Mortgage? (ARM)

Answer:  A mortgage loan that permits the lender to periodically adjust the interest rate on the basis of changes in a specified index.

The mortgages usually have a fixed rate for a certain number of years after which fluctuates based on the US Treasury rate.

The most common Adjustable Rate Mortage are 5/1 ARM, 7/1 ARM mortgages. 5/1 ARM is an adjustable rate mortgage that has a five year initial fixed rate and resets every year after that.

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