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 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.
