Adjustible Rate Mortgage

Source: About.com

An adjustable rate mortgage (ARM for short), is a mortgage with an interest rate that is linked to an economic index. The interest rate, and your payments, are periodically adjusted up or down as the index changes.

Index
An index is a guide that lenders use to measure interest rate changes. Common indexes used by lenders include the activity of one, three, and five-year Treasury securities, but there are many others. Each ARM is linked to a specific index.

Margin
Think of the margin as the lender's markup. It is an interest rate that represents the lender's cost of doing business plus the profit they will make on the loan. The margin is added to the index rate to determine your total interest rate. It usually stays the same during the life of your home loan.

Adjustment Period
The adjustment period is the period between potential interest rate adjustments.

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NOTE:

Most of the mortgages in Singapore have adjustible rate. However, in the past, they are based on the board rate decided by the lender. Recently, some lenders have introduced loans with rates that are linked to a market benchmark (ie similar to the ARM in America).