Definition of "Discretionary ARM"

Nancy Marquez GRI, SRES real estate agent

Written by

Nancy Marquez GRI, SRESelite badge icon

Coldwell Banker Residential Brokerages

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.

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Mortgage Terms

The present value of a house, given the elderly owner's right to live there until she dies or voluntarily moves out, under FHA's reverse mortgage program. ...

Someone authorized by the original credit card holder to use the holder's card. While authorized users are not responsible for paying any charges, including their own, they are sometimes ...

Adjustable rate mortgages on which the interest rate is mechanically determined based on the value of an interest rate index. Indexed ARMs are distinguished from Discretionary ARMs, in that ...

The federal law that specifies the information that must be provided to borrowers on different types of loans. Also, the form used to disclose this information. Truth in Lending (TIL) is ...

Mortgages typically amortize over time through fixed value installment payments. However, there's a type of mortgage that doesn't: the Balloon Mortgage. It's called this way because, with ...

A documentation option where the applicant's income is disclosed and verified but not used in qualifying the borrower. The conventional maximum ratios of expense to income are not ...

The assumption of a mortgage, with permission of the lender, from a borrower unable to continue making the payments. ...

To define a home equity line of credit, we can also take a look at how credit cards work. Similarly to credit cards, home equity lines of credit are sources of funds that can be accessed ...

Every ARM is tied to an interest rate index. An index has three relevant features:availibility, level, volatility. All the common ARM indexes are readily available from a published source, ...

Popular Mortgage Questions