Fixed-Period ARM


DEFINITION of 'Fixed-Period ARM'

An adjustable-rate mortgage (ARM) with an initial fixed-interest-rate period. After the fixed-interest rate expires, the interest rate starts to adjust based on an index plus a margin.  The amount by which the interest rate can adjust after the fixed period is usually subject to an interest rate cap structure. 

These are often called "hybrid ARMs".


Typically, in the prime mortgage market, fixed-period ARMs are offered with fixed-interest rate periods of three, five, seven and 10 years. In the subprime market a two-year fixed-rate period is frequently offered. Typically, the shorter the fixed-interest rate period, the lower the interest rate will be. A borrower should carefully consider their time horizon when choosing a fixed-period ARM and recognize the risks associated with the expiration of the fixed-interest rate period.

  1. Mortgage

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

    A hybrid adjustable-rate mortgage blends the characteristics ...
  3. Payment Option ARM

    A monthly adjusting adjustable-rate mortgage (ARM) which allows ...
  4. Interest Rate Cap Structure

    Limits to the interest rate on an adjustable-rate loan - frequently ...
  5. Two-Step Mortgage

    A mortgage that offers an initial fixed-interest rate for a period ...
  6. Adjustable-Rate Mortgage - ARM

    A type of mortgage in which the interest rate paid on the outstanding ...
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