What are 5-1 ARM Loans?
5-1 ARM loans are loans with a fixed rate for the first five years and an adjustable rate for the remainder of the loan term. ARM loans are also known as adjustable-rate mortgage loans. The rate of interest can increase or decrease once a year after the initial five years. There are many different factors that contribute to the interest rate. It is important to understand all of your options when refinancing with a 5-1 ARM loan. The 5-1 refers to the first five years where the interest rate is fixed and the fluctuating interest rate once a year. 5-1 ARM loans can allow lower payments, especially for the first five years where the interest rate is fixed.
The Benefits of 5-1 ARM Refinanced
- Low Initial Interest Rates
The interest rates on a 5-1 ARM are low. The fixed amount will ensure you pay a consistent rate for the first five years of your loan term. Homeowners refinance for many reasons. One of the most popular reasons is due to low interest rates in their area. If interest rates have recently decreased in your area, it is important to take advantage of refinancing. Consulting with a qualified mortgage lender can be helpful for homeowners.
- Perfect for Selling
If a homeowner plans to list their home for sale after the first five years, they are able to receive a benefit. Selling your home will allow you to benefit from the initial fixed rate period of your 5-1 ARM loan. The savings on your interest adds up within the first five years and can be allocated for a variety of expenses. For example, with the savings you receive, you could pay a year of college tuition or a purchase a new car. Homeowners that want to be strategic with their finances typically select a 5-1 ARM refinanced loan.