Profile picture for jwf667

what is 5/1 ARM?

  • September 07 2010 - Arcata
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Be a Good Neighbor. Be respectful and on-topic. No spam or self-promotion! See our Good Neighbor Policy.

 
 

Answers (4)

Profile picture for SoCal Engr
"This means your interest rate is fixed for 5 years but will adjust after the 5 years.  Most people refinance within the 5 years or as soon as it adjusts."

Unless they can't, even though they need to, because they're now upside down, or the LTV is too high.

As others have said, with rates at where they're at now, there's no reason to risk an ARM. With the RE market they way it is now, any short-term plans to sell/move may be sidetracked by market reality.
  • September 07 2010
  • 1Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

JW,

A 5/1 ARM is a 30 year amortization with the first five years at a fixed rate.
http://www.freddiemac.com/corporate/buyown/english/mortgages/what_is/adjustable_rate.html

With 30 year fixed rates as low as they are today, there is minimal advantage and considerable risk. Unless you are so very positive you will not own the property for more than 5 years. Regardless of your equity position. 

I perform a large percentage of jumbo loans. A 5/1 was very popular in the past. Now, most of my borrowers choose a 30F, due to the low fixed rates. Even with high dollar amounts, most folks would rather not take the risk.  .... Happy funding, Rudi

  • September 07 2010
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

with rates at generational lows, picking an ARM loan today would be the absolute height of bad thinking...
  • September 07 2010
  • 2Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

It is a five year fixed - adjustable rate mortgage.  This means your interest rate is fixed for 5 years but will adjust after the 5 years.  Most people refinance within the 5 years or as soon as it adjusts.
  • September 07 2010
  • 1Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.