Five Year Arm Mortgage

A 5 1 hybrid adjustable rate mortgage 5 1 arm begins with an initial five year fixed interest rate period followed by a rate that adjusts on an annual basis.

Five year arm mortgage.

What is a 5 5 arm. The 5 1 arm is the most popular type of adjustable rate mortgage. The loan s margin is 1 75 which never changes and the index has risen to 2 5. Your interest rate is set for 7 years then adjusts for 23 years.

Homeowners with a 5 1 arm have interest rates that don t change for the first 60 months of the loan s life. The fixed rate of 3 percent would become a variable rate of 4 25 percent. If you had a 5 1 arm with a 2 75 percent margin this is fairly. The 5 refers to the number.

One common 5 1 arm is based on an index called the 1 year libor. The arm option. The initial interest rates for adjustable rate mortgages are normally lower than a. After that initial five year period interest rates can either increase or decrease once every 12 months.

The 5 in the term refers to the. Your interest rate is set for 3 years then adjusts for 27 years. Your interest rate is set for 5 years then adjusts for 25 years. As of this writing that index is 3 05 percent.

The difference is that with the arms you can spread the payment over 30 years so you can get a low rate on par with a 10 year fixed rate mortgage without the high monthly costs. General advantages and disadvantages. After that the mortgage rate becomes variable and adjusts every five years. If a loan is named a 5 1 arm then what that means is the loan is fixed for the first 5 years then the rate resets each year thereafter.

Now fast forward five years. After the initial introductory period the loan shifts from acting like a fixed rate mortgage to behaving like an adjustable rate mortgage where rates are allowed to float or reset each year. Let s say that initial rate is 3 percent. For instance if you take out a 5 year adjustable rate mortgage the loan has a fixed rate for five years.

A 5 5 arm is an adjustable rate mortgage that has a fixed mortgage rate for the first five years of a 30 year loan term.