Definition
Adjustable-Rate Mortgage—a loan where the interest rate can fluctuate based on market conditions after an initial fixed period. It's the financial equivalent of a mystery box: exciting at first, potentially terrifying later.
Example Usage
She chose a 5/1 ARM because the initial rate was fantastic, but now she's nervously watching the market as year five approaches.
Origin
Emerged in the 1980s as lenders sought to shift interest rate risk to borrowers during volatile economic periods
Fun Fact
ARMs became infamous during the 2008 housing crisis when millions of homeowners faced dramatically increased payments they couldn't afford.
Source: Consumer Financial Protection Bureau mortgage terminology
Related Terms
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See “arm” in Corporate Speak, Gen-Z Slang, Pirate Speak, and more.
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