Mortgages 5/1 ARM

A 5/1 ARM, or adjustable-rate mortgage, is an alternative to a fixed-rate mortgage that offers the advantage of lower interest rate during the first five years, after which it resets once a year. A 5/1 ARM is your smartest choice if you plan to sell or refinance your house within 5 years as you will enjoy initial low rate and will not risk getting it increased. Browse and compare the leading 5/1 ARM options from the best mortgage lenders with Mike Credit fast loan finder.
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5/1 ARM mortgage offers

Although a lot of people go for a fixed-rate mortgage, considering an adjustable-rate mortgage too risky, many experts suggest this conclusion is premature as ARM can actually be the most beneficial and the least expensive means of real estate financing for many potential home buyers.

Lower rates

If you are looking for the lowest available rate and want to save money on your mortgage payments, here is Mike Credit overview of the reasons why 5/1 adjustable rate mortgage might serve you best:

  • The lowest rate for five years. 5/1 ARM works in the following way: you have a fixed interest rate during the first five years, after which it will be adjusted once a year (this is what the numbers “5/1” stand for). The initial interest fee is lower than on fixed-rate mortgages because the borrower takes the risk of possible increase in rates after     the initial 5-year period, while in FRM this risk is taken by the lender.
  • If you plan to sell your house during the first five years, you will not even see the moment when the interest rate actually starts fluctuating, so you will enjoy low interest payments without carrying any risk.
  • With an ARM you will know from the very beginning what maximum possible rate you could expect. Most ARMs today carry caps limiting the extent of interest rate change, some of them limit the overall monthly payment. To see how it works, let's say the initial interest fee on your 5/1 ARM is 4%, afterwards it will be calculated as a sum of LIBOR (London Interbank Offered Rate) and the margin of 3%. For instance, after the initial 5-year period LIBOR is equal to 5%, which added to the loan margin would make the new interest rate become 8%. However, your loan has a cap of 3 percentage points, so the adjusted rate cannot exceed 7%.

Make the best choice

When potential risks are known and manageable it might be worth taking them. An adjustable-rate mortgage can become a great tool for reducing mortgage costs and saving your money. Use our mortgage calculator to view and compare the best 5/1 adjustable-rate mortgage plans. Just enter some information and get customized loan products from numerous lenders.