Adjustable Rate Mortgage ( ARM ) - A mortgage in which the interest rate and payment changes periodically over the life of the loan based on changes in a specified index. The changes are usually subject to a cap .

Adjustable rate mortgage loans are covered by regulations that require, at a minimum, disclosure of the circumstances under which the rate may increase, any limitations on the increase, the effects of an increase and an example of the payment terms that would result from an increase.

Amortization – When a loan is amortized, the monthly payment amount is based on a formula that usually will reduce the principal amount of your loan to zero at the end of a specific time period, for example 30 years. Initially, most of the payment goes to interest but over time more of the payment goes to principal until it is all paid off.