5/1 ARM Mortgage Rates - One of the Best Loan Option

A 5/1 Year ARM mortgage rate is a type of mortgage where the interest rate payable is fixed for a period of 5 years after which it becomes an adjustable mortgage rate. The new rate is determined by the economic index which can either be the treasury average or the treasury index. It can also one year InterBank Offered rate called LIBOR and this is added to the predetermined margin which can be anywhere between 2.25% and 3% so that you can arrive at the monthly rate. The loan is fully paid off in 30 years as per the normal payment schedule.

The 5/1 Year ARM mortgage rate is best for the real estate market condition where the value of the houses appreciate quickly. It can also be beneficial for those people who are not wishing to stay in their home for long. It can also be taken by those people who are expecting to refinance before the rate adjusts. There are several different indexes on which the interest rate depends. The index is usually variable, but the margin is fixed for the duration of the loan.

The 5/1 Year ARM mortgage rate has its own sets of advantages and disadvantages. To start with advantages, the initial rates are lower than the fixed mortgage rates and you can also qualify for a high loan amount if the interest rates drop. Your monthly payments will also drop if your interest rates drop. The disadvantage of the A 5/1 Year ARM mortgage rate is that the rates will increase after the adjustment period of 5 years is over and these rates could be quite high. Also the rates could be extremely high down the road and planning that a refinance will bail you put will no longer hold good.

Social Bookmarking

Featured Listings

Foreclosure Listings by State