Real Estate Glossary

What is Convertible Adjustable-Rate Mortgage?

A convertible adjustable-rate mortgage (ARM) is a type of home loan that starts with a fixed interest rate for a certain period of time, and then converts to an adjustable rate. The adjustable rate is based on a financial index, such as the prime rate, and it can change periodically. A convertible ARM can be a good option for borrowers who want the stability of a fixed rate at first, but who also want the potential for lower rates in the future.