Mortgage Dictionary: Definition of Interest-Only ARM
Here is the definition for 'Interest-Only ARM'. To show a different definition, select a term from the dropdown text box. The online mortgage glossary will display a definition, plus links to related information.
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Interest-Only ARM
Like the fixed-rate
interest-only loan
, an interest-only ARM requires
only monthly interest payments. Like a traditional
adjustable-rate mortgage,
it often has an initial period when the interest rate is fixed,
followed by periodic adjustments. The main advantage of an
interest-only, adjustable-rate mortgage (ARM) is
its low monthly mortgage payments. The main disadvantages are that it does
not reduce the loan principal, and that the interest rate varies (often upwards)
after the initial fixed-rate period.
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