ARM stands for Adjustable-Rate Mortgage. It is a term related to Financial, Useful Terms and Definitions which we use in daily life but we do not know their full name, Here’s a list of important abbreviations that you should know.
What is full form of ARM?
The full form of ARM is the Adjustable-Rate Mortgage. A variable rate mortgage, adjustable rate mortgage (ARM), or follow-up mortgage is a mortgage loan with the interest rate on the note periodically adjusted based on an index that reflects the cost to the lender of borrowing in the credit markets.
The loan may be offered at the lender’s base rate / standard variable rate. There may be a direct and legally defined link to the underlying index, but where the lender does not provide a specific link to the underlying market or index, the rate may be changed at the lender’s discretion.
Here you learn the full name and complete information of Adjustable-Rate Mortgage, if you have questions and answers related to ARM, then tell us your thoughts in the comment, know the complete meaning of ARM in this article.
With an adjustable rate mortgage, the initial interest rate is fixed for a period of time. After this initial period of time, the interest rate is reset periodically, at annual or even monthly intervals. The interest rate for ARM is reset based on a benchmark or index, plus an additional margin called the ARM margin.
Obtaining an adjustable rate mortgage as interest rates rise can be risky. After a few rate resets, your initial interest savings could evaporate as your payment skyrockets.
Short-Term Homeowners: If you don’t see yourself living in the same home for more than 5-7 years, an ARM makes more sense than a 30-year fixed-rate mortgage. People who see their income rise are prime candidates for this type of mortgage, as many people refinance before the interest rate has time to adjust.
If interest rates stay low or even fall, adjustable-rate mortgages can save you a lot of money. Fixed-rate mortgages may be a better option for those who plan to stay or need reliable mortgage payments that never change.