Loan programs
Adjustable-rate mortgage (ARM)
A loan whose rate moves with an index over the life of the loan
The rate is an index plus a fixed margin, adjusted at set intervals and bounded by periodic and lifetime caps. The margin stays constant; the index is what moves.
How the exam asks about it
Index, margin, adjustment period and caps are the four components, and items usually ask you to identify which is fixed and which floats.
Related terms
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