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. The rate is initially fixed for a specific period, after which it resets periodically, typically annually, based on an index that reflects the cost to the lender of borrowing on the credit markets.
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. The rate initially remains fixed for a period before adjusting at preset intervals.
An adjustment index is the published interest rate used to calculate the interest rate of an Adjustable-Rate Mortgage (ARM) at the time of origination or adjustment.
The adjustment interval refers to the frequency at which the interest rate of an adjustable-rate mortgage (ARM) is recalculated. It plays a crucial role in determining how often a borrower's mortgage payments may change.
Any mortgage other than a fixed-interest-rate, level-payment amortizing loan. AMIs provide unique approaches to mortgage lending, often accommodating borrowers with non-traditional income streams or financial situations.
Annual cap is a limitation on the amount by which the interest rate on an adjustable-rate mortgage (ARM) can increase or decrease over a one-year period, protecting borrowers from significant fluctuations in their monthly mortgage payments.
A Convertible ARM is an Adjustable Rate Mortgage (ARM) that gives the borrower the ability to change the payment schedule to a fixed-rate at specific points during the loan term, commonly for a nominal fee, with an interest rate determined by the original loan agreement.
A flexible-payment mortgage is a financing option that allows borrowers to make varying monthly payments but ensures that the total repayments are sufficient to amortize the loan over its term.
A floating rate is an interest rate on a loan, bond, or other fixed-income security that fluctuates over time according to a specific benchmark or index. This rate is not fixed and can change throughout the term of the financial instrument.
In real estate, a 'Floor' is a provision in the contract of an adjustable-rate mortgage (ARM) that sets a minimum interest rate for the loan, ensuring it does not fall below a specified level regardless of market conditions.
A Hybrid Mortgage combines features of both a fixed-rate mortgage and an adjustable-rate mortgage, typically starting with a fixed interest rate for an initial period followed by an adjustable rate for the remaining period.
An Indexed Loan is a long-term loan where the term, payment, interest rate, or principal amount may be adjusted periodically in accordance with a specific index.
The initial interest rate is the beginning rate applied to an adjustable-rate mortgage, typically set for an initial period before adjustments. It often acts as an introductory rate that may be lower than prevailing market rates.
The Initial Rate Period is the timeframe in an Adjustable-Rate Mortgage (ARM) during which the initial interest rate is fixed. This period lasts until the first scheduled adjustment, after which the interest rate is recalibrated according to the underlying index.
A Life of Loan Cap is a contractual limitation on the maximum interest rate that can be applied to an adjustable-rate mortgage during the term of the loan.
In real estate and finance, a margin refers to the constant amount added to the value of the index to adjust the interest rate on an adjustable-rate mortgage (ARM). It is a critical component in determining the overall interest rate that a borrower will pay.
An Option ARM (Adjustable-Rate Mortgage) is a type of mortgage loan that allows borrowers to select from multiple payment options each month, enabling flexibility based on financial circumstances. These payment options typically include fully amortizing payments, interest-only payments, and minimum payments that can lead to negative amortization.
A contractual limit on the percentage amount of adjustment allowed in the monthly payment for an adjustable-rate mortgage at any one adjustment period, which can lead to negative amortization if the payment does not cover the interest due.
A loan typically used outside the United States, whose payments are adjusted according to the rate of inflation, making payments predictable in terms of real value.
A Renegotiated-Rate Mortgage (RRM) is a unique type of mortgage loan where the interest rate is revised at predetermined intervals. It is distinctive because it does not rely on economic indices for its rate adjustments.
A teaser rate is an initial lower interest rate offered on an adjustable-rate mortgage to entice borrowers, which eventually adjusts to the fully indexed rate.
A Variable-Maturity Mortgage (VMM) is a long-term mortgage loan where the interest rate may be adjusted periodically, impacting the loan term while keeping the payment levels constant.
A Variable-Rate Mortgage (VRM) is a long-term mortgage loan applied to residential properties, under which the interest rate adjusts on a scheduled basis, typically every six months. Rate increases are restricted to no more than ½ point per year and a total of 2½ points over the Term. The term Adjustable-Rate Mortgage (ARM) is now more commonly used.
