Interest rate that reflects the total cost of a loan for a given year. The Truth in Lending Act mandates that the APR be disclosed to borrowers.
Paying off a debt, such as a mortgage, in regular installments over a period of time.
Adjustable rate mortgage (ARM)
A mortgage where the interest rate varies over time. The interest rate is usually fixed for an initial period and then is adjusted at regular intervals, often every month, against a specific benchmark. The borrower is protected by a maximum allowed interest rate, called a rate cap, and is usually compensated for the risk presented by interest rate adjustments with a lower initial rate than a fixed rate mortgage.