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Put simply, the 5/1 ARM is an adjustable-rate mortgage with a 30-year loan term that’s fixed for the first five years and adjustable for the remaining 25 years. So during years one through five, the interest rate never changes. If it starts at 4%, it remains at 4% for 60 months. Nothing to worry about there.
Mortgage Rate Adjustment · Another mortgage option is an adjustable rate mortgage (arm).This type of mortgage’s interest rate is tied to an economic index. So what does that mean, exactly? Well, while an ARM offers a lower initial interest rate, it’s only at first.
The 15-year fixed mortgage generally carries an interest rate that’s similar to that of the 5/1 ARM. And unlike the ARM, the interest rate is fixed for the entire term of the home loan. The catch?
Choosing a 5/1 ARM could save you money on your monthly mortgage payment. For example, let’s say you are purchasing a $200,000 house and putting down 20 percent. After borrowing $160,000 at a 7 percent interest rate, your monthly payment on a 30 year fixed rate mortgage is $1,064.48 each month.
How a 5/1 arm mortgage works. The term 5/1 ARM means that you will get five years of a fixed interest rate, followed by one-year increments of adjustable rates. This means that for the first five years of the mortgage, you are going to have the same interest rate and the same monthly mortgage payment.
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Adjustable Rate Mortgage (ARM) – The interest rate changes throughout the loan, but when and how much depends on your specific loan. During the first 5 years, of your 5/1 ARM, you would have a fixed interest rate.
A variable-rate mortgage, adjustable-rate mortgage (ARM), or tracker mortgage is a mortgage loan with the interest rate on the note periodically adjusted based on an index which reflects the cost to the lender of borrowing on the credit markets. The loan may be offered at the lender’s standard variable rate/base rate.
After five weeks of declines, mortgage rates are at their. average fell to 3.46 percent with an average 0.5 point. It was 3.51 percent a week ago and 4.06 percent a year ago. The five-year.
5/5 Adjustable Rate Mortgage (ARM) from PenFed. For home purchases or refinancing on loan amounts up to $453,100. The rate adjusts only once every five years.