Adjustment Interval

Adjustment Interval

In adjustable-rate mortgages and variable-rate mortgages, the time between two changes in the interest rate of the mortgage or loan. Often, the adjustment interval lasts one year, but some loans change rates as often as once a month or as seldom as every five years. The shorter the adjustment interval, the higher the financial risk is for the homeowner. For example, if the adjustment interval for a mortgage is one month, a homeowner's mortgage payment could increase every month for five months or longer before it decreases again. This ties up more of the homeowner's income, and increases the likelihood of default.

Adjustment Interval

On an ARM, the time between changes in the interest rate or monthly payment.

These are the same on a fully amortizing ARM, but may not be on a negative amortization ARM. See Adjustable Rate Mortgage.

References in periodicals archive ?
Furthermore, in most specifications, the unweighted average price adjustment interval for all industries is below 1 yr, and the weighted average--using industry shares of total sales as weights--price adjustment interval for all specifications ranges from no higher than 3.
Their aggregate parameter estimates imply a relatively lengthy average price adjustment interval, typically at least 6 quarters in the case of U.
To calculate an unweighted average estimated price adjustment interval for a given NAICS industry grouping or for all firms, we average the parameter estimates of [theta] for the relevant industries.
Then, we calculated the implied adjustment interval, 1/(1 - [?
This percentage drops to below 23% when the discount factor is restricted to reasonable values, and under these restrictions, industries accounting for at least 36% of all sales in the industries we analyze have estimated price adjustment intervals of less than 2 quarters.
Numerous theoretical contributions to the burgeoning sticky-price literature likewise appeal to the lengthy estimated price adjustment intervals forthcoming from applications of the Gali-Gertler empirical methodology as justification for the assumption of generalized price stickiness.
The adjustment interval, or the time between changes in your mortgage's interest rate.
You may be comfortable foregoing a longer adjustment interval or stringent caps, while instead searching for the lowest possible initial interest rate.
Likewise, if you're planning to stay in the home you're buying for just a few years, an ARM with an adjustment interval of five years would give you the advantages of a lower interest rate with none of the risks - as long as you sell before the five years are up.
First note that the exponent of 1/3 in (9) implies that third-order price adjustment costs have first-order effects on the optimal price adjustment interval.
Adjustment intervals typically range from one month to five years.
Another concern among servicers is the higher unit-servicing costs anticipated for ARMs, especially those with negative amortization, short adjustment intervals and the relatively few that have adjustable servicing fees.