Adjustable Rate Mortgage ARM

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Definition of 'Adjustable Rate Mortgage ARM'

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The Adjustable Rate Mortgage (ARM) (mostly in the United States) is also known as a variable-rate mortgage (mostly outside of the United States) or tracker mortgage.

This is a mortgage loan where the interest rate periodically adjusted based on an index. The most common indices used for the ARM are:
  • 1-year constant-maturity Treasury (CMT) securities
  • The Cost of Funds Index (COFI)
  • London Interbank Offered Rate (LIBOR)

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