We will explain how an adjustable-rate mortgage works and how they compare to the more common 30-year fixed-rate mortgage. >> Rate Search: Check Fixed and ARM Rates. What is a 5-1 ARM? A 5-1 hybrid arm (5-1 hybrid adjustable rate mortgage) is a type of adjustable rate mortgage term with a very low initial rate for a fixed period.
The "hybrid" refers to the ARM’s blend of fixed-rate and adjustable-rate characteristics. Hybrid ARMs are referred to by their initial fixed-rate and adjustable-rate periods, for example, 3/1, is for an ARM with a 3-year fixed interest-rate period and subsequent 1-year interest-rate adjustment periods.
The 15/15 ARM vs. 5/1 and 7/1 ARMs. 5/1 and 7/1 ARMs are the most popular types of adjustable-rate mortgages. Each of those ARMs have shorter fixed-rate periods – five and seven years respectively – after which they adjust every year for the life of the loan.
Hi Lisa, Welcome to the forums. I think you should calculate the overall costs of taking out the 30 year loan and the 5/1 year ARM. That is, add the closing costs along with.
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· Find the best 5/1 ARM loans and understand if an adjustable-rate mortgage makes sense for you.. Typical terms are 15- and 30-year, but 10- and 20-year terms are also common.. A clause in the loan contract that allows the borrower to convert the loan from an adjustable rate to a fixed rate or from interest-only to a fully amortized payment.
A 5/1 ARM is still a 30-year loan, so you might be better off actually going with a short-term loan such as a 10-year fixed or 15-year fixed, etc. Of course you’ll need to make sure you still qualify with higher monthly payments on shorter-term loans.
Mortgage companies such as Quicken Loans, for example, offer 15 and 30 year fixed rates, while other lenders such as J.G. Wentworth offer other options such as 20-year mortgages. Representative Example: If you bought a home for $500,000 with a 25% down payment, at an APR of 3.5% and a 15-year fixed term, you would pay around $2,700 per month.
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Ever wonder what type of mortgage you should get between a 30-year fixed and an adjustable rate mortgage (arm)? The answer is usually an ARM to save money on interest as interest rates have been coming down for over 35 years in a row. Think twice before taking out the conventional 30-year fixed mortgage loan.