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Home Loans: ARM (Adjustable-Rate) Mortgage

A type of mortgage in which the interest rate paid on the outstanding balance varies according to a specific benchmark. The interest rate paid by the borrower will be based on a benchmark plus an additional spread, called an ARM margin. An adjustable rate mortgage is also known as a "variable-rate mortgage" or a "floating-rate mortgage".

Allrate Funding has 2/28, 3/27, 5/25, 7/23 and 10/20 ARM home loans. The initial interest rate is fixed for a period of time after which it is reset periodically, often every month. All 2/28, 3/27, 5/25, 7/23 and 10/20 mortgages are examples of ARMs. A 2/28 mortgage's initial interest rate is fixed for a period of two years and then resets to a floating rate for the remaining 28 years of the mortgage. A 3/27 mortgage is typically the same as a 2/28 mortgage, except that the interest rate is fixed for three years and then floats for the remaining 27 years of the mortgage. Same for the 5/25, 7/23 and 10/20.

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