What is a 5/5 Adjustable Rate Mortgage?
Homebuyers have many choices when it comes to finding the mortgage that best fits their needs. Two of the most popular types are a traditional, fixed rate mortgage and an adjustable rate mortgage (ARM).
Based on the needs of our members, Sunmark recently launched a 5/5 Adjustable Rate Mortgage product – but what does that mean for you?
An adjustable rate mortgage, or ARM, fluctuates its rate based on the term selected. The rate at closing is usually fixed for a certain length of time, such as five years, and then changes at the end of that cycle depending on economic factors.
So how does an ARM mortgage work? Here is how Sunmark’s 5/5 ARM is broken down:
· The introductory rate is set for five years (the first 5 in the 5/5 ARM).
· After that period, the interest rate can change every five years (that’s the second 5 in the 5/5 ARM). This rate could go up or down during that time – but it’s a maximum 2% more after every adjustment.
· This process continues over the course of 30 years.
Interest rates can be unpredictable, although recent trends tend to go up and down over multi-year cycles. Given the recent increase in rates, ARMs can help you save money in the early days of your loan by securing a lower initial rate.
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