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Jovanmommy_13

You are considering a 5/1 ARM. What does the 5 represent? A.The number of years between adjustments in the interest rate B.The number of years that a fixed interest rate will be applied to the loan C.The total number of years in the loan D.The interest rate of the initial fixed-rate loan period

  • one year ago
  • one year ago

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  1. jim_thompson5910
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    the 5 in 5/1 means that you apply a certain interest rate for the first five years...this interest rate will NOT change during the first five years. the 1 in 5/1 means you increment that interest rate (a specific/fixed amount) each year until you reach the cap

    • one year ago
  2. jim_thompson5910
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    example: say you have a 5/1 ARM at 5.25% annual interest rate and you have a 1/12 cap structure this would mean that during the first five years the interest rate is locked in at 5.25% after the 5 years, the interest rate will go up one percentage point (6.25% on year 6, 7.25% on year 7, etc) until you reach the cap of 12%

    • one year ago
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