Adjustable Rate Mortgage (ARM)

A mortgage ( loan in which the interest rate on the note ( periodically fluctuates based on listed indexes. Certain indexes are more commonly used, including the London Interbank Offered Rate ( (LIBOR) and the Cost of Funds Index (COFI). However, some lenders tie ARMs to their own cost of funds indexes instead. ARMs often contain limitations (caps) on what a borrower can be charged as interest rates rise.

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