Adjustable-rate mortgage (ARM)
Definition
A mortgage that features predetermined adjustments of the loan interest rate at regular intervals based on an established index. The interest rate is adjusted at each interval to a rate equivalent to the index value plus a predetermined spread, or margin, over the index, usually subject to per-interval and to life-of-loan interest rate and/or payment rate caps.
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Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University
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Statement of Additional Information (SAI)
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