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GLOSSARY

Canadian Financial, Real Estate and Mortgage Glossary

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Adjustable-Rate Mortgage


Synonyms:non-fixed, shifting, variable
Acronyms &
abbreviations:
ARM
Notes:A type of variable rate mortgage product.
Filed Under: mortgages
Tags: banking, mortgage, mortgage product, mortgage rates, rates
 

Definition of adjustable-rate mortgage (ARM)

adjustable-rate mortgage (ARM)
1. An "Adjustable Rate Mortgage" or ARM refers to the type of mortgage loan where the interest rate and monthly payments can be adjusted to rise and fall with market conditions. The interest rate and payments can be adjusted as frequently as once a month or you can adjust the principal loan balance or the loan term to reflect the rate change.

Related Terms and Acronyms:

  • convertible mortgage   A mortgage where the borrower has the option at specified times to change the term length.
  • fixed rate mortgage (FRM)   A loan in which the interest rate and payments remain the same for the entire life of the loan. The interest rate and payment amounts are set at the time of loan origination.
  • lock-in   A lender's guarantee that the mortgage rate quoted will not change for a specific period. The borrower wants the lock to stay in effect until closing.
  • mortgage (mtg)   A mortgage is a contract stipulating a specific real property, typically a residence or building, as collateral for a loan. The mortgage incurs a rate of interest that varies according to term and other features.
  • mortgage rate   The interest rate on a mortgage loan.
      ➥  You can compare mortgage rates using this website by clicking 'Rates' above.
  • periodic rate cap   In an adjustable-rate mortgage (ARM), it limits how much an interest rate can increase or decrease from one adjustment period to the next.
  • qualifying rate   The mortgage rate that one must qualify for when applying for a variable rate or a term less than 5 years, so that if rates increase, the borrower can continue to make payments.
  • roll over mortgage   A type of loan where the interest rate is set for a specific term. At the end of this term, the mortgage is said to "roll-over" and the borrower and lender may agree to extend the loan. If satisfactory terms cannot be agreed upon, the lender is entitled to be repaid in full. In this case, the borrower may seek alternative financing.
  • variable interest rate   Percentage that a borrower pays for the use of money, and which moves up or down periodically based on changes in other interest rates.
  • variable rate mortgage (VRM)   Home loan in which the interest rate is changed periodically based on a standard financial index. Also called an "Adjustable-rate Mortgage."
      ➥  A type of mortgage loan offered by brokers and lenders.

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