Definition of Adjustable-rate mortgage (arm)

A mortgage that features predetermined adjustments of the loan interest rate at regular intervals based on an established index. The interest rate is adjusted at each interval to a rate equivalent to the index value plus a predetermined spread, or margin, over the index, usually subject to per-interval and to life-of-loan interest rate and/or payment rate caps.

A mortgage loan which bears interest at a rate subject to change during the term of the loan.