ARM Margin

To understand the ARM Margin, let's review the ARM part. It stands for Adjustable Rate Mortgage (and you thought it meant the loan cost an arm, and maybe a leg). The adjustable refers to the interest rate, and means it can vary throughout the course of the loan.

Mortgages usually start with a fixed rate, but at a defined point in time during the loan, the interest can start varying, every five years, annually or even monthly (depends on the loan terms). The margin of the ARM is the fixed percentage rate being added to the indexed percentage, so it's the highest interest rate the loan may carry.