Adjustable-Rate Mortgage
A variable-rate mortgage subtype where your monthly payment adjusts (not just the principal/interest split) each time Prime Rate changes.
An adjustable-rate mortgage (ARM) is a variant of variable-rate mortgage where the monthly payment itself adjusts every time the lender's Prime Rate changes. This is distinct from the more common fixed-payment variable mortgage offered by the Big 5 banks, where the payment stays constant and only the principal/interest split shifts. The ARM structure means you never hit a trigger rate — you feel every Bank of Canada decision immediately in your payment — but your budgeting has to accommodate payment variance. ARMs are more common at monoline lenders, credit unions, and some non-Big-5 Schedule I banks.
Related Terms
A mortgage where the interest rate is tied to Prime Rate and moves with every Bank of Canada Policy Rate decision.
The rate at which a fixed-payment variable mortgage's monthly payment no longer covers the interest owed — forcing a payment increase or conversion.
The base interest rate each Canadian lender charges its most creditworthy customers, typically set about 2.00% above the Bank of Canada Policy Rate.