Home Buying

What Is an Adjustable-Rate Mortgage (ARM)?

An adjustable-rate mortgage (ARM) is a home loan with an interest rate that is fixed for an initial period and then changes at set intervals based on a benchmark index plus a margin. A 5/1 ARM, for example, has a fixed rate for five years and then adjusts once a year.

How ARM Rates Adjust

After the initial period, the new rate = index + margin, subject to caps that limit how much the rate can change at each adjustment and over the life of the loan. These caps are listed in the loan documents.

ARM vs. Fixed-Rate

An ARM's initial rate is often lower than a comparable fixed rate, but future payments are uncertain because they depend on where the index moves.

🧮 Calculate It Yourself

Put Adjustable-Rate Mortgage (ARM) into practice with these free calculators — no sign-up, nothing stored.

🏠 Mortgage Calculator Estimate your monthly mortgage payment including taxes, insurance, and PMI. Calculate → 📅 Amortization Schedule Calculator See your full year-by-year loan breakdown and what an extra payment saves. Calculate →

🔗 Related Terms

Fixed-Rate Mortgage Mortgage Interest Rate Refinancing

More Home Buying Terms

📖 Browse all glossary terms or explore all free calculators.

Last updated: September 27, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.