Remember the margin stays the same but the index may fluctuate on a monthly basis. So when you refinance you can negotiate your margin and the index type. Once decided, the index type never changes.

Research the historical trends on the various ARM indices to see which tend to change less over time. Also, if your ARM is about to adjust after a fixed period, start watching the index so you'll have some idea what your new rate will be. If it will be too high, you may wish to consider refinancing before the adjustment date.

When choosing an Adjustable Rate Mortgage (ARM), it is recommended to research on the underlying index. Some indices tend to adjust faster and more often than others. As a mortgagor, a less volatile index is most preferred.

PRIME is a actually short for the Federal Prime Lending Rate. It represents an interest rate in itself. The prime rate is also indexed, and used to determine the interest rate you will be charged when you apply for a Home Equity Line of Credit.