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Mortgage loans come in many varieties. One is the adjustable-rate mortgage, commonly referred to as the ARM. Unlike a fixed-rate mortgage, in which the interest rate is locked in for the life of the loan, an ARM is a mortgage that has an interest rate that changes.
With an ARM, you get the benefit of a lower initial rate for a few years before the interest rate changes, typically going higher. For example, with a 5/1 ARM, the interest rate will adjust initially.
ING Direct recently offered a 5/1 ARM for loans up to $750,000, at 2.75%, with a 2/2/6 cap. The 5/1 part means the rate is fixed for 5 years and adjusts up or down annually afterward (based in this.
Lower rates help you build equity faster. After five years of equally sized payments, the buyer who used the 5/1 ARM instead of a 30-year mortgage would be more than $7,200 closer to paying off the home in full. Having more home equity is a powerful buffer should interest rates rise. If, at the end of five years,
A 5/1 adjustable-rate mortgage, or ARM, is a mortgage loan that has a fixed rate for the first five years, and then switches to an adjustable-rate mortgage for the remainder of its term. Once a year after that initial five-year period, the interest rate can be adjusted up or down, depending on a number of factors.
Shopping for the lowest 5/1 ARM rates? Check out current mortgage rates and save money by comparing your free, customized 5/1 ARM rates from NerdWallet.
For example, with a 5/1 ARM loan for a 30-year term, your interest rate would be fixed for the initial 5 years and could fluctuate up or down each subsequent year for the next 25 years. ARM loans typically feature lower rates and monthly payments than comparable fixed-rate loans during the initial rate period, but rates could increase or.
Another choice is an ARM. An ARM is designed to deal with fluctuating interest rates. The monthly payment could change based on the current rate. An example is a 5/1 ARM. This loan has a fixed rate.
A five-year ARM is often referred to as a 5/1 hybrid ARM. This type of mortgage loan has an initial interest rate that remains in effect for the first five years; then the loan becomes an.