What does a 5'5 arm mean?
Then, what is the difference between 5'1 arm and 5 5 arm?
The primary difference between a 5/1 and 5/5 ARM is that the 5/1 ARM adjusts every year after the five-year lock period, whereas a 5/5 ARM adjusts every five years. Despite annual and lifetime rate caps, ARMs may have interest rate spikes over time.
Similarly, what does a 3/5 arm mean? A 3/5 ARM is an Adjustable Rate Mortgage that has an initial interest rate for the first three years and adjusts every five years thereafter. The adjustment is based on (or "indexed to") the Constant Maturity Treasury (CMT) rate.
Additionally, is a 5'1 arm a good idea?
A 5/1 ARM can work out in your favor under the right conditions. Here's when a 5/1 ARM might be a good idea. The advantage of a 5/1 ARM is that during the first phase, you get a much lower interest rate and payment. If you plan to sell in less than six or seven years, a 5/1 ARM could be a smart choice.
What is a 5'2 arm?
The life cap on a loan is used frequently as part of an interest rate cap structure. For example, a fixed period or hybrid ARM frequently has initial, periodic, and life caps. On a 5-1 hybrid ARM, this might be expressed as a 5-2-5 cap structure, meaning there is a 5% initial cap, 2% periodic cap and 5% life cap.