An adjustable-rate mortgage (ARM) is a type of mortgage in which the interest rate applied to the outstanding balance changes throughout the life of the loan at regular intervals based on a formula that uses the market index.
For most ARM options, rate adjustments begin after an initial period of five, seven, or ten years. During the initial period, the rate is fixed.
The most popular adjustable-rate mortgage is the 5/1 ARM. The 5/1 ARM’s introductory rate lasts for five years. (That’s the “5” in 5/1). After that, the interest rate can change once a year. (That’s the “1” in 5/1). Talk with us about 3/1 ARMs, 7/1 ARMs, and 10/1 ARMs.