Adjustment Frequency

AAA

DEFINITION of 'Adjustment Frequency'

The frequency at which interest rate changes or resets on an adjustable-rate mortgage occur. Different adjustable-rate mortgages have different adjustment frequencies. Typically, the adjustment frequency is once a year, but it can be as often as once a month or as infrequent as once every five years.

INVESTOPEDIA EXPLAINS 'Adjustment Frequency'

The lower the rate-adjustment frequency, the lower the financial risk for the borrower. To compensate for lower interest rates in the future - and thus lower margins - the lender will usually expect the borrower to pay a higher initial interest rate before the first reset date.

RELATED TERMS
  1. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  2. Margin

    1. Borrowed money that is used to purchase securities. This practice ...
  3. Fixed Interest Rate

    An interest rate on a liability, such as a loan or mortgage, ...
  4. Interest Rate

    The amount charged, expressed as a percentage of principal, by ...
  5. Variable Interest Rate

    An interest rate on a loan or security that fluctuates over time, ...
  6. Adjustable-Rate Mortgage - ARM

    A type of mortgage in which the interest rate paid on the outstanding ...
RELATED FAQS
  1. I'm about to retire. If I pay off my mortgage with after-tax money I have saved, ...

    Only you and your financial advisor, family, accountant, etc. can answer the "should I?" question because there are many ... Read Full Answer >>
  2. Can small investors buy collateralized mortgage obligations (CMOs)?

    Collateralized mortgage obligations (CMOs), which are pools of mortgage-backed securities (MBS), are available to smaller ... Read Full Answer >>
  3. What is the difference between an option-adjusted spread and a Z-spread in reference ...

    Unlike the Z-spread calculation, the option-adjusted spread takes into account how the embedded option in a bond can change ... Read Full Answer >>
  4. What are some historical examples of debt securitization?

    The first debt securities were probably sovereign debt assets that were transferred from the British government to mercantilist ... Read Full Answer >>
  5. What price-to-book ratio is considered average in the chemicals sector?

    You can use Microsoft Excel to calculate the loan-to-value ratio if you have the mortgage amount and appraised value of a ... Read Full Answer >>
  6. How can I use the correlation coefficient to predict returns in the stock market?

    Simple interest is most commonly seen in short-term loans, such as those from payday lenders or pawn shops. You might see ... Read Full Answer >>
Related Articles
  1. Credit & Loans

    Mortgages: Fixed-Rate Versus Adjustable-Rate

    Both of these have advantages and disadvantages depending on your financial needs and prospects.
  2. Personal Finance

    Understanding Your Mortgage

    We walk through the steps needed to secure the best loan to finance the purchase of your home.
  3. Budgeting

    Mortgages: How Much Can You Afford?

    Answering this means number-crunching as well as factoring in other considerations and expenses.
  4. Credit & Loans

    Understanding The Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  5. Home & Auto

    What Are The Tax Advantages Of Buying A Home?

    Don't forget these deductions and credits that homeowners can use to reduce their tax bill.
  6. Credit & Loans

    How To Finance Foreign Real Estate

    If you don't pay cash, financing real estate abroad is likely to cost more than at home. Watch for local laws and be sure your rights are protected.
  7. Credit & Loans

    Save? (Or Prepay Your Mortgage Or Student Loan?)

    With low-interest rate loans, you might be better off paying just your monthly minimum and investing whatever extra funds you have.
  8. Credit & Loans

    Not a U.S. Citizen? A Home Loan is Still Possible

    Many banks and mortgage companies offer conventional and FHA home loans to non-U.S. citizens, if they can verify their work history and financial status.
  9. Credit & Loans

    Is it Worth Saving Up for a Bigger Down Payment?

    There are numerous low-down-payment mortgage options out there, but sometimes it makes sense to build up your savings so you can borrow less.
  10. Credit & Loans

    Is A 30-Year Mortgage Really Best?

    It's the most popular choice, but home buyers with 30-year mortgages may be paying more to finance their home than they need to.

You May Also Like

Hot Definitions
  1. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  2. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  3. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  4. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  5. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  6. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
Trading Center