Definitions of Adjustable Rate Mortgage (ARM)
- A mortgage loan with an interest rate that can adjust up or down based on market conditions. The mortgage payments are usually adjusted on an annual basis as the interest rate changes. The first year commonly features a special low rate that allows borrowers to qualify for a higher loan amount. These loans have many valid uses, such as with a buyer who knows they will sell in a short time period, but they have also been abused in recent years as buyers ended up with more home than they could afford. This definition of Adjustable Rate Mortgage (ARM) contributed by jimolenbush.
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