What Is A 7 Yr Arm Mortgage WASHINGTON – Long-term U.S. mortgage. The fee on 30-year fixed-rate mortgages fell to 0.4 point from 0.5 point last week. The fee for 15-year mortgages was unchanged at 0.4 point. The average rate.
When you apply for a mortgage, there are two basic varieties to choose from: fixed-rate or adjustable-rate. By far the most common mortgage product in the United States is the 30-year fixed-rate, and the most common adjustable-rate variety is the 5/1 ARM.
An adjustable rate mortgage, called an ARM for short, is a mortgage with an interest rate that is linked to an economic index. The interest rate and your payments are periodically adjusted up or down as the index changes.
A 5/1 adjustable-rate mortgage, or ARM, is a mortgage loan that has a fixed rate for the first five years, and then switches to an adjustable-rate mortgage for the remainder of its term. Once a year after that initial five-year period, the interest rate can be adjusted up or down, depending on a number of factors.
As an example, a 5/1 ARM means that the initial interest rate applies for five years (or 60 months, in terms of payments), after which the interest rate is adjusted annually. (Adjustments for escrow accounts, however, do not follow the 5/1 schedule; these are done annually.) Fully Indexed Rate
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 before the rate becomes adjustable.
Since the 5/1 ARM is a blend of a fixed-rate and adjustable-rate loan, it can also be known as a hybrid mortgage. How 5/1 ARM interest rates adjust adjustable-rate mortgages are less predictable than fixed-rate loans and are directly impacted by economic factors after you’ve started repaying the loan.
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.
The 5/5 ARM presents a lower payment-change risk than a 5/1 ARM or a 7/1 ARM, but still offers lower initial rates than a 30-year fixed rate mortgage. However, borrowers who plan to stay in their house for longer than a decade will probably prefer the security of a fixed-rate mortgage.
Definition Adjustable Rate Mortgage An adjustable-rate mortgage, or ARM, has an introductory interest rate that lasts a set period of time and adjusts annually thereafter for the remaining time period. After the set time period your interest rate will change and so will your monthly payment.