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What is a 5/1 ARM?

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June 09 - US
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Answers (6)

The previous posts describe it.
I will add that qualifying for it under the new Ability to Repay rules means that many lenders use the payment in the 61st month.  So, with 5% caps, your 3.25% loan has a "qualifying" payment of a 8.25% rate with a 25 year amortized term.  That is why you will see many people go for the 7/1 which uses the actual start rate to qualify.  Rate for 7/1 is typically about 0.375% higher than the 5/1, but qualifying is easier..
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June 18
First off, ARM stands for an adjustable rate mortgage. This means you will get a fixed rate for a certain period of time, then after you rate will be adjusted. The 5 means that your initial fixed rate will last for 5 years. Then, your rate will be adjusted after each year which is what the 1 stands for. These types of mortgage can be good options depending on your situation. So the best thing for you to do is to speak with a knowledgeable lender to see if you can get started on financing a new home. If you need additional assistance, feel free to reach out. Good luck!
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June 09
The "5" indicates the initial fixed term of the interest rate in years.  The "1" indicates how often your interest rate can adjust (in years) after the fixed period and also means that the index is based on in the 1-Year LIBOR. 
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June 09
Adjustable Rate Mortgage (ARM), The first 5 years are fixed and then the rate can adjust every year going forward.
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June 09
An adjustable-rate mortgage (ARM) with an initial five-year fixed-interest rate. After this initial five-year period, the interest rate begins to adjust on an annual basis according to an index plus a margin (or, the fully indexed interest rate). The speed and the extent to which the fully indexed interest rate can adjust are usually limited by an interest rate cap structure. There are several different indexes that the fully indexed interest rate might be tied to. While the index is variable, the margin is fixed for the life of the loan.
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June 09
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Adjustable Rate Mortgage, with the rates fixed for the first 5 years, and then changes every year after according to the index and margin posted; amortized over 30 years.
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June 09
 
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