3/1, 5/1, 7/1, 10/1 ARM

This is an adjustable-rate mortgage (ARM) that has an initial fixed interest rate for a period of years - the front number, and thereafter has an adjustment interval of one year. Other arms similar to this one adjust every 6, and it would be called a 3/6 arm, it will be fixed for the first 3 years and then adjust every 6 months to a different rate (assuming the rate changes) The adjustment is based on (or "indexed to") another rate -- often the yield on a Treasury note. Someone taking out a $165,000.00 5/1 ARM at the current average would pay $954.53 a month for the first five years of the loan. The rate would change based on the adjustment period thereafter.

These type of loans are excellant for the person who is planning on moving in 3,5,7,10 years and wants a fixed stable payment. Sometimes these loans have options available to add on to them, such as interest only payments for a fixed period, or a lower fixed rate in exchange for a prepayment penalty of 1-3 years.

We have alot of clients who use these type of ARM's.  Call us so we can explain all the loan options available for your situation.