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TeachMeFinance.com ARM -- Adjustable Rate Mortgage; a mortgage loan subject to changes in interest rates ; when rates change, ARM monthly payments increase or decrease at intervals determined by the lender; the Change in monthly -payment amount, however, is usually subject to a Cap. another definition... ARM -- see adjustable rate mortgage. adjustable rate mortgage (ARM) -- a loan in which the interest rate is periodically adjusted, moving higher or lower in the same ratio as a preselected index, such as Treasury bill rates. ARM loans may include caps on interest rate increases in a given time period, and over the life of the loan, and may include limits on the frequency of interest rate adjustments. ARM loans generally have initial below market interest rates in return for the borrower sharing the risk that interest rates may rise during the life of the loan. About the author Mark McCracken Author: Mark McCracken is a corporate trainer and author living in Higashi Osaka, Japan. He is the author of thousands of online articles as well as the Business English textbook, "25 Business Skills in English". Copyright © 2005 by Mark McCracken, All Rights Reserved. TeachMeFinance.com is an informational website, and should not be used as a substitute for professional financial or legal advice. TeachMeFinance.com and its owner recommend consultation with a professional financial advisor prior to any investment or financial decision. Please read our disclaimer.