Adjustable Rate Mortgage (ARM)
A mortgage on which the interest rate adjusts periodically based on a stated index plus a spread (margin). The index may be a market reference rate and the borrower's note rate changes as the index changes, subject to the loan's adjustment mechanics.
- Where it applies
- Generally, not specific to New York
- When it comes up
- Origination; underwriting; servicing
- Property types
- Residential (1-4 unit), condo, co-op (concept applies; product availability varies)
In practice
Because the index and the contractual "spread over index" are separate economic components, rate comparisons should isolate (a) the index basis and (b) credit/term spread, especially in refinance analysis.
Read more in the Knowledge Base
- Mortgage Product Architecture for NYC Buyers - Jumbo, ARM, Rate Lock, Float-Down, and RecastBuyers
- Refinancing and Prepayment StrategyBuyers
- Mortgage Product Architecture in New YorkBuyers
Related terms
Secured Overnight Financing Rate (SOFR)indexmargin/spreadaccrual ratepay ratepayment shockamortization
Residential Financing
- Accrual Rate
- Amortization
- Application (TRID application)
- Conforming Loan Limit
- Pay Rate
- PMI Automatic Termination
- PMI Cancellation (Borrower-Requested)
- Private Mortgage Insurance (PMI)
- Secured Overnight Financing Rate (SOFR)
- TILA-RESPA Integrated Disclosures (TRID)
General information, not legal, tax or financial advice.