Discretionary ARM
An ARM on which the lender has the right to change the interest rate at any time, for any reason, by any amount, subject only to a requirement that the borrower be notified in advance. The discretionary ARM is at the opposite pole from Indexed ARM's on which rate adjustments are completely rule-based. Discretionary ARM's were long the standard mortgage in the U.K. and in other English-speaking countries that imported it from the U.K., such as India and South Africa. They never caught on in the U.S., where the indexed ARM prevails.
Popular Mortgage Terms
A mortgage on which interest is calculated daily based on the balance on the day of payment, rather than monthly, as on the standard mortgage. ...
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A transaction in which interest is not paid on interest there is no compounding. For example, if you deposit $1,000 in an account that pays 5% a year simple interest, you would receive ...
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