Adjustable rate mortgage (ARM)

What is Adjustable rate mortgage (ARM)?

A mortgage that permits the lender to adjust its interest rate periodically on the basis of changes in a specified index and in relation to a specified margin. Many adjustable rates will begin at a low interest rate. That low interest rate may stay the same for a certain time period. When that time period is over, the interest rate will change or adjust and the amount of the payment is likely to go up.