Adjustable-Rate Mortgage (ARM)

Definition:

A loan with an interest rate that changes periodically in keeping with a current index, such as one-year treasury bills.

Examples:

Many people finance their homes using an adjustable-rate mortgage hoping that the economy stays healthy so that their interest rates will not go up.

She moved from a fixed-rate to an adjustable-rate mortgage just before the stock market lost half its value, and in the subsequent recession, saw her mortgage payments double.