Secure Option ARM

DEFINITION of 'Secure Option ARM'

A type of payment-option adjustible-rate mortgage with a fixed-interest-rate period. The mechanics of a secure option arm are very similar to a payment option arm except that it has a fixed interest rate period similar to fixed period or hybrid ARM. In other words, secure option ARMs have the same monthly payment options as a payment option ARM, including a minimum payment option that is based on a temporary start interest rate that lasts for first one to three months. However, after the expiration of the temporary start interest rate, the secure option ARM has a fixed-interest-rate period similar to a fixed-period or hybrid ARM.

BREAKING DOWN 'Secure Option ARM'

While secure option arms offer more protection from payment shock than a true payment option arm, the monthly payment on a secure option arm still has the potential to increase substantially. This can occur if the negative amortization limit is reached or when the fixed-interest-rate period ends, which usually coincides with the first scheduled recast of the mortgage.

RELATED TERMS
  1. Fixed-Period ARM

    An adjustable-rate mortgage (ARM) with an initial fixed-interest-rate ...
  2. Payment Option ARM Minimum Payment

    An option to make minimum payments on an payment option ARM, ...
  3. Flexible Payment ARM

    A type of adjustable-rate mortgage that allows the borrower to ...
  4. Convertible ARM

    An Adjustable Rate Mortgage (ARM) that gives the borrower the ...
  5. Payment Shock

    The risk that a loan's scheduled future periodic payments may ...
  6. Cap

    The highest point to which an adjustable rate mortgage (ARM) ...
Related Articles
  1. Personal Finance

    Option ARMs: American Dream Or Mortgage Nightmare?

    Option adjustable rate mortgages could make or break your home-buying experience.
  2. Markets

    3 Growth Opportunities For ARM Holdings

    ARM Holdings highlighted several growth opportunities in its most recent roadshow presentation. Here are three of the large opportunities it talked about.
  3. Investing

    This ARM Has Teeth

    Find out how to avoid getting bitten when your mortgage rate resets.
  4. Markets

    3 Key Numbers ARM Holdings Investors Need to Know (ARMH)

    ARM Holdings (NASDAQ: ARMH) has experienced tremendous growth over the past decade as chips built on the ARM architecture have dominated the mobile market, powering the vast majority of smartphones ...
  5. Markets

    3 Reasons ARM Holdings' Stock Could Rise (ARMH)

    Shares of semiconductor specialist ARM Holdings (NASDAQ: ARMH) have more than quadrupled in value over the past five years as strong demand for smartphones has driven the company's revenue and ...
  6. Managing Wealth

    The Best Candidate For an Adjustable Rate Mortgage

    Adjustable-rate mortgages aren't for everyone, but they make sense if you are a short-term homeowner or can pay off the loan before it readjusts.
  7. Managing Wealth

    Adjustable Rate Mortgage: What Happens When Interest Rates Go Up

    Adjustable rate mortgages can save borrowers money, but they can't go into it blind. In order to benefit from an ARM, you have to understand how it works.
  8. Personal Finance

    Mortgages: Fixed-Rate Versus Adjustable-Rate

    Both of these have advantages and disadvantages depending on your financial needs and prospects.
  9. Trading

    Introduction To The Arms Index

    Developed in 1967 by Richard Arms, this volume-based breadth indicator can be applied over various time periods.
  10. Trading

    Calculating the Arms Index (TRIN)

    The Arms Index is a technical analysis indicator that’s used to predict price movements in the market on an intraday basis.
RELATED FAQS
  1. What is the difference between a 2/28 and a 3/27 ARM?

    An adjustable rate mortgage (ARM) is a type of mortgage that has a fixed interest rate for a certain time period at the beginning ... Read Answer >>
  2. Why is the Arms Index (TRIN) important for traders?

    Learn more about the Arms Index, or TRIN, and how traders and chartists use the Arms to measure market volatility and trading ... Read Answer >>
  3. Is an adjustable rate mortgage (ARM) safe?

    Learn why an adjustable rate mortgage (ARM) can be a safe option as long as the borrower is familiar with the underlying ... Read Answer >>
  4. How is the Arms Index (TRIN) calculated?

    Read how to calculate the Arms Index, or TRIN, using the ratio and volume of advances and declines in any given stock index ... Read Answer >>
  5. Are arm's length transactions always better than transactions not at arm's length?

    Transactions not at arm's length have real tax and other consequences for individuals and businesses, but they are not necessarily ... Read Answer >>
  6. How do regulators ensure that markets are conducted at arm's length?

    Learn about arm's length transactions and how the Investment Advisers Act allows stockbrokers to sell securities based on ... Read Answer >>
Hot Definitions
  1. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  2. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  3. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
  4. Russell 3000 Index

    A market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of ...
  5. Enterprise Value (EV)

    A measure of a company's value, often used as an alternative to straightforward market capitalization. Enterprise value is ...
  6. Security

    A financial instrument that represents an ownership position in a publicly-traded corporation (stock), a creditor relationship ...
Trading Center