An adjustable rate mortgage (ARM), sometimes known as a variable-rate mortgage, is a home loan with an interest rate that adjusts over time to reflect market conditions. Once the initial fixed-period is completed, a lender will apply a new rate based on the index – the new benchmark interest rate – plus a set margin amount, to calculate the new rate.

but there are a few scenarios where an ARM can be less than ideal. The mortgage industry employs a fantastic rule of thumb for mortgage affordability. underwriters prefer that a borrower’s recurring.

5/1Arm In the case of a 5/1 ARM, the mortgage rate is fixed for the first five years. That’s what the "5" refers to. Then, the mortgage can adjust each year thereafter for the remaining 25 years of the loan term. That’s what the "1" refers to, since the rate changes after one year.What Is A 5 1 Arm Mortgage Define This limits the use of the adjustable rate mortgage to help. can be priced no higher than 1.5 percent over prime. This can be tricky, because it smacks of price controls, and price controls almost.

Depending on your timetable, you can also look to refinance at a shorter fixed period, such as a 15-year loan or an adjustable-rate loan that has a shorter fixed term before the rate adjusts. Those.

An adjustable-rate mortgage, or ARM, is a home loan with an interest rate that can change periodically. This means that the monthly payments can go up or down. Generally, the initial interest rate is lower than that of a comparable fixed-rate mortgage. After that period ends, interest rates – and your monthly payments – can go lower or higher.

An adjustable-rate mortgage, or ARM, is a home loan with an interest rate that can change periodically. This means that the monthly payments can go up or down. This means that the monthly payments.

DEFINITION of ‘Adjustable-Rate Mortgage – ARM’. An adjustable-rate mortgage (ARM) is a type of mortgage in which the interest rate applied on the outstanding balance varies throughout the life of the loan. Normally, the initial interest rate is fixed for a period of time, after which it resets periodically, often every year or even monthly.

When an adjustable-rate loan could be the better choice. As I mentioned, the 5/1 ARM mortgage comes with a lower interest rate, but its cost is certain only for the first five years.

What Is Arm Mortgage – If you are looking for mortgage refinance, then try our easy to use service. Get the information you need fast.

Understanding ARM Terms. Index: An ARM loan’s interest rate after the initial fixed rate has passed is connected to an interest rate index. The index is used to determine future interest rates. arm Margin: This is a fixed interest rate that is calculated into the lifespan of the loan.