Adjustable Rate Mortgage Definition
Back to Glossary terms. adjustable rate Mortgage (ARM) A mortgage with an interest rate that can change during the term of the loan. The timing and calculation of adjustments (also called resets) are determined by the loan program, and these details are disclosed in the mortgage documents.
Thus, when the current index value changes, the borrower’s rate changes. Adjustable rate mortgage loans are a lending product that incorporates both fixed and variable interest. Adjustable rate.
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Adjustable-rate mortgage (ARM) A mortgage that features predetermined adjustments of the loan interest rate at regular intervals based on an established index. The interest rate is adjusted at each interval to a rate equivalent to the index value plus a predetermined spread, or margin, over the index.
The rate on your adjustable rate mortgage is determined by some market index. Many adjustable rate mortgages are tied to the LIBOR, Prime rate, Cost of Funds Index, or other index.The index your mortgage uses is a technicality, but it can affect how your payments change.
The interest rate that you secure when you first get an adjustable rate mortgage is called the initial rate. In many cases, the lender may offer a fixed rate for a period before the adjustment period begins. pennymac, for example, offers adjustable rate loans with 3, 5, 7, and 10 years of an initial fixed rate.
according to the Mortgage Bankers Association. Compare that with the rate on a five-year ARM, which was 3.38%. The rate on an adjustable-rate loan, by definition, will change after the fixed period,
adjustable rate mortgage definition: variable rate mortgage. Learn more.
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An adjustable rate mortgage is a loan that bases its interest rate on an index. The index is typically the Libor rate, the fed funds rate, or the one-year Treasury bill.. An ARM is also known as an adjustable rate loan, variable rate mortgage, or variable rate loan.
Adjustable-rate mortgage definition. An adjustable rate mortgage is a home loan with an interest rate that can change over time. In most cases, an adjustable rate mortgage will have a low fixed.
15 Year Refinance Mortgage Rate 30-year conventional cash-Out Refinance. A 30-Year Conventional Cash-Out Refinance loan in the amount of $225,000 with a fixed rate of 3.875% (4.060% APR) would have 360 monthly principal and interest payments of $1,058.03.