An adjustable rate mortgage, commonly referred to as an ARM, is a mortgage where the interest rate on the mortgage changes periodically, on a schedule, according to an index. The most common indexes used to determine the interest rates are:
- One-year constant maturity treasury securities (CMT)
- Cost of Funds Index (COFI)
- London Interbank Offered Rate (LIBOR)
- A lending institution's own costs of funds.