ADJUSTMENT INTERVAL

The amount of time between interest rate changes to an adjustable rate mortgage (ARM). Most ARMs have two adjustment intervals. The first interval is typically longer (usually 3,5,7 or 10 years) during which there is a fixed rate of interest and payment. This initial interval is followed by periodic adjustments to the interest rate (usually every 6 months or year) throughout the remainder of the loan.

An example of this would be a 3/1 ARM. The first number denotes the initial period of time in which the interest rate and payment remain fixed followed by the second number denoting the subsequent adjustment intervals. In this example, the interest rate and payment remains the same for the first three years of the loan, after which it can adjust every year.