Adjustable Rate Loan
· For an adjustable-rate mortgage, the loan estimate will contain additional information that is not included on the loan estimate for a fixed-rate mortgage. The loan estimate will describe the length of time the initial rate will apply and how often the rate will be recast.
What Does 5 1 Arm Mean ARMS Defined – The Mortgage Porter – The second digit (5/1) is how often the ARM will adjust after the fixed period (at the 61st payment with a 5/1 ARM). Your rate will continue to adjust once a year on the anniversary of the first adjustment date. You may also see 5/6 ARMs, that means the payments will adjust every 6 months instead of once a year.
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An adjustable rate mortgage (ARM) has an interest rate that is fixed for a set number of years and then afterwards will go up or down based on a market index such as the LIBOR . When deciding which loan option will be best for you, consider factors such as the length of time you plan to stay in your home.
The difference between a fixed rate and an adjustable rate mortgage is that, for fixed rates the interest rate is set when you take out the loan and will not change. With an adjustable rate mortgage, the interest rate may go up or down.
Bankrate.com provides FREE adjustable rate mortgage calculators and other ARM loan calculator tools to help consumers learn more about their mortgages.
An adjustable-rate mortgage (ARM) has an interest rate that changes — usually. carries a fixed rate for five years, then adjusts annually for the life of the loan.