Adjustable-Rate Mortgage (ARM)
A mortgage with an interest rate that changes periodically based on a market index after an initial fixed-rate period. ARMs typically have lower initial rates than fixed-rate mortgages. Rate adjustments can cause monthly payments to increase significantly.
Related guides
- Full credit & FICO® glossary
Browse all defined terms by category.
- Mortgage
A loan used to purchase or refinance real estate, where the property serves as collateral. Mortgages are installment loans with terms typically ranging from 10 to 30 years. Missing mortgage payments can lead to foreclosure. Minimum credit scores vary by loan type (FHA: 500, conventional: 620).
- Interest Rate
The percentage charged by a lender for borrowing money, expressed annually. The interest rate is the base cost of borrowing. APR (Annual Percentage Rate) is a broader measure that includes fees in addition to the interest rate.
Frequently Asked Questions About Adjustable-Rate Mortgage (ARM)
What does Adjustable-Rate Mortgage (ARM) mean?
A mortgage with an interest rate that changes periodically based on a market index after an initial fixed-rate period. ARMs typically have lower initial rates than fixed-rate mortgages. Rate adjustments can cause monthly payments to increase significantly.
Is Adjustable-Rate Mortgage (ARM) important for my FICO® score?
Understanding Adjustable-Rate Mortgage (ARM) helps you manage your credit profile more effectively, which in turn supports a stronger FICO® score.