(ARM) Adjustable Rate Mortgage - An Adjustable Rate Mortgage is a loan in which the interest rate varies at predetermined intervals in step with the movements of an agreed upon external index rate for some portion of the life of the loan.

A mortgage in which the interest periodically "adjusts", according to various fluctuations in an index. All ARMs are tied to indexes. Common indexes are T-Bill, MTA, COFI, COSI, CODI, & LIBOR.

It will be in your best interest to refinance the ARM before it begins to adjust. Although there areinterest rate caps on the amount of the first rate adjustment, once the ARM begins to adjust your payent will more then likely increase.

Adjustable rate mortgages often have lower initial interest rates and payments.

Today's Adjustables lock in lower rates for longer than ever before, so you can fix that low initial interest rate for 5 years or more.

For customers who plan on living in their home for less than 5 to 7 years, adjustable rate mortgages, particularly fixed/adjustable hybrids are often an excellent option.

Adjustable Rate Mortgages or ARM mortgages are an excellent choice for your first home purchase, for growing families, and for building up credit.