The term ARM refers to an Adjustable Rate Mortgage or Variable Rate Mortgage. This type of loan has a fixed interest rate for a specified period of time, after which the interest rate may change according to a designated "Index." A "Margin" is added to the "Index" to determine the new rate at the time of adjustment. ARMs will start at a rate lower than fixed rate programs but will have the potential to be higher over the life of the loan. All ARM programs have interest rate CAPS which determine how much the rate can fluctuate over the lifetime of the loan.
