Adjustable Rate Loan  · be well-understood by the borrower before closing the loan. The variations in the interest rate on an adjustable rate mortgage will be determined by one or a combination of indexes, which reflect underlying interest rates in financial markets overall.

The 5/1 ARM is the most popular type of adjustable-rate mortgage. Homeowners with 5/1 adjustable-rate mortgages have interest rates that don’t change for the first 60 months. After that initial five-year period, interest rates can either increase or decrease once every 12 months.

When mortgage rates are rising, it may seem crazy to consider a 5/1 ARM ( adjustable rate mortgage) or a 15-year fixed-rate loan. After all.

What Is Variable Rate What Is A 7 1 arm mortgage Loan A 5/1 hybrid adjustable-rate mortgage (5/1 hybrid ARM) begins with an initial five-year fixed-interest rate, followed by a rate that adjusts on an annual basis. The "5" in the term refers to the.What is a Variable Interest Rate? (with picture) – wisegeek.com – The adjustable rate mortgages work as a hybrid mortgage in which a portion of this interest rate loan is a variable rate interest and a portion of loan is at a fixed rate. For example a 3 year ARM indicates a mortgage that has a fixed rate with three years, with an adjustable variable interest rate once or twice a year thereafter.

Definition of 5/1 Adjustable rate mortgage (arm): A type of home loan for which the interest rate varies during the life of the loan. The mortgage begins with an . The mortgage begins with an . What Is A 5 1 Arm Mortgage, Living frugally means being answerable for your funds. A 5/1 ARM or a fixed-rate mortgage it will depend on your situation.

A 5/1 ARM is one of the most popular types of adjustable-rate mortgages in the market today; many people choose this type of mortgage over a 30-year fixed-rate mortgage.

The 5/1 hybrid adjustable-rate mortgage, also known as a 5-year ARM, is a hybrid mortgage that offers an initial five-year fixed-interest rate.

5/1 ARM: Your interest rate is set for 5 years then adjusts for 25 years. 3/1 arm: Your interest rate is set for 3 years then adjusts for 27 years. General Advantages and Disadvantages. The initial interest rates for adjustable rate mortgages are normally lower than a fixed rate mortgage, which in turn means your monthly payment is lower. If you only plan to stay in your home for a short period of time, an ARM loan might be advantageous to you because you plan on moving or selling your home.

How to Pay Off a Mortgage Quickly 5/1 ARM example. Chemi wants to purchase a home, and she goes to her bank to get a mortgage. Her bank offers her a 5/1 adjustable-rate mortgage with 3.6 percent.

A variable-rate mortgage, adjustable-rate mortgage (ARM), As an example, a 5/1 ARM means that the initial interest rate applies for five years.

ARM Strength. The advantage of a 5/1 ARM is that during the first phase, you get a much lower interest rate and payment. If you plan to sell in less than six or seven years, a 5/1 ARM could be a smart choice. In a five year period, that savings could be enough to buy a new car or cover a year’s college tuition.