Loans

5/1 ARM

5/1 ARM

5/1 Adjustable-Rate Mortgages Give You Financial Flexibility

When it comes to mortgage loans, there’s no one size fits all. There are options fitting every preference. For example, a fixed-rate loan gives you dependable monthly payments regardless of future rate changes. However, an adjustable-rate mortgage (ARM) grants more flexibility.

ARMs allow your loan’s rate to periodically change. This means your rate may increase and decrease during after the intial term of your loan is over. You risk higher rates, but you may also get lower rates than fixed-rate loans. ARMs come in all shapes and sizes, such as the 5/1 ARM.

 

What is a 5/1 ARM?

A 5/1 ARM mixes fixed-rate and adjustable-rate features. The number “5” represents how long the loan’s fixed rate lasts before rates become adjustable. The number “1” indicates how often the adjustable rate changes.

In other words, the ARM’s first five years has a lower fixed rate than conventional fixed-rate mortgages. After the first five years, the loan has an adjustable rate. The adjustable rate changes every year.

 

Why Should You Choose a 5/1 ARM?

A 5/1 ARM has many benefits. You can:

  • Save money up-front with five years of low rates.
  • Use the extra money to pay down your principal.
  • Use the extra money to buy furniture.
  • Give the market time to cool down before rates adjust.
  • Decide if your purchase is a long-term home while paying low rates.

 

Is a 5/1 ARM Right for You?

The answer to this question depends on your vision for the home and your finances. If you’re buying a three-to-five-year starter home, the 5/1 ARM’s low beginning rates will save you money. This loan also provides greater flexibility than fixed-rate loans, which helps if you’re confident in future rate drops and comfortable with change.

Did you decide a 5/1 ARM fits your lifestyle? Contact First Bank today, and we’ll help you get approved.


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