Mortgage Programs
»
Adjustable Rate Mortgage (ARM) – Key Items

Adjustable Rate Mortgage (ARM) – Key Items

Michael Jensen, Mortgage and Finance Guru
By , Mortgage and Finance Guru
Edited by Harry Jensen
Updated November 2, 2018
%
Current Adjustable Rate Mortgage (ARM) Rates in Columbus, Ohio as of November 1, 2025
View All Lenders

%
Rate data provided by RateUpdate.com. Displayed by ICB, a division of Mortgage Research Center, NMLS #1907, Equal Housing Opportunity. Payments do not include taxes, insurance premiums or private mortgage insurance if applicable. Actual payments will be greater with taxes and insurance included. Read through our lender table disclaimer for more information on rates and product details.
About the author
Michael Jensen, Mortgage and Finance Guru

Michael is the co-founder of FREEandCLEAR. Michael possesses extensive knowledge about mortgages and finance and has been writing about mortgages for nearly a decade. His work has been featured in leading national and industry publications. More about Michael

Key Adjustable Rate Mortgage Concepts
Term
  • Indicates the length of the mortgage, presented in years
  • ARMs typically have a term of 30 years
  • A 30 year ARM has 360 monthly mortgage payments (12 payments per year * 30 years = 360 total monthly payments)
  • Monthly mortgage payments may change over the term of the mortgage
Fixed Rate Period
  • Initial time period for ARM during which the interest rate is fixed and cannot change
  • The fixed rate period is typically 3, 5, 7 or 10 years
Fixed Period Interest Rate
  • The interest rate for the initial fixed rate period
Adjustable Rate Period
  • The period of time from the end of the fixed rate period through the end of the term of the mortgage during which the interest rate is subject to change on a pre-determined basis, either annually or semi-annually
Adjustment Interval
  • Indicates how often the interest rate for an ARM adjusts during the adjustable rate period
  • The adjustment interval for most ARMs is a year although some ARMs have semi-annual (six month) intervals
Fully-Indexed Rate
  • ARM interest rate for the adjustable rate period
  • Calculated by adding the ARM index to the ARM margin
  • The fully-indexed rate typically adjusts every year during the adjustable rate period and will change with fluctuations in interest rates
Index
  • The index is an underlying interest rate that is one of two components of the fully-indexed rate
  • The value of the index can change over the term of the mortgage
  • Lenders typically use the 1 year LIBOR as the ARM index
Margin
  • The second of two components used to calculate the fully-indexed rate
  • The margin is a set interest rate amount that does not change over the term of the loan
  • The ARM margin is typically 2.0% - 3.0%
Initial Adjustment Cap
  • A cap that limits the change in interest rate when it first adjusts following the fixed rate period
  • The initial adjustment cap is typically 2.0% or 5.0%
  • For example, if the initial adjustment cap is 5.0%, the initial fully indexed rate following the fixed rate period cannot go up by more than 5.0% as compared to the fixed period interest rate
Subsequent Adjustment Cap
  • A cap that limits the change in the fully-indexed rate in any adjustment period following the initial adjustment
Life Cap
  • A cap that limits the maximum increase in interest rate over the term of the mortgage
  • The typical life cap for an ARM is 5.0% which means the fully indexed rate cannot exceed the initial fixed period interest rate plus 5.0%
About the author
Michael Jensen, Mortgage and Finance Guru

Michael is the co-founder of FREEandCLEAR. Michael possesses extensive knowledge about mortgages and finance and has been writing about mortgages for nearly a decade. His work has been featured in leading national and industry publications. More about Michael

Michael Jensen LinkedInLinkedIn | Email Michael JensenEmail
X

Get Free Personalized Mortgage Quotes

First Name:
Last Name:
Phone Number:
Email:

My Mortgage Info

Mortgage Type
Credit Score
Loan Amount
Property Value
City
State
GET FREE Quotes
FREEandCLEAR.comThank you for submitting your information!
FREEandCLEAR.comYour mortgage quote request has been sent to our lending partners and you should receive emails from multiple lenders shortly
FREEandCLEAR.comComparing proposals from multiple lenders is the best way to save money on your mortgage!