adjustable rate mortgage (ARM)
Definition
Real estate loan in which the interest rate is periodically (usually every six months) adjusted up or down to reflect the current market rates. ARMs usually specify limits as to how high or low the interest rate can go, and how frequently the changes can be made. Such loans usually start with an attractively low rate of interest (the 'teaser rate') to attract borrowers. Also called variable rate mortgage. See also adjustable mortgage loan.
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