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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 fixedrate loan period
 one year ago
 one year ago
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 fixedrate loan period
 one year ago
 one year ago

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jim_thompson5910Best ResponseYou've already chosen the best response.0
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

jim_thompson5910Best ResponseYou've already chosen the best response.0
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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