FinancingLoan TypesMEDIUM
A 5/1 ARM means:
Correct Answer
B) Fixed for 5 years, then adjusts annually
Fixed rate for 5 years, then adjusts annually based on a market index plus margin, with rate caps.
Answer Options
A
5% down, 1% pointsB
Fixed for 5 years, then adjusts annuallyC
5-year termD
Max 5% increase year 1Why This Is the Correct Answer
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Why the Other Options Are Wrong
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Deep Analysis of This Financing Question
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Background Knowledge for Financing
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Related Topics & Key Terms
Related Topics:
rate caps (periodic and lifetime)SOFR indexmarginballoon mortgagefixed-rate mortgage comparisonTILA ARM disclosuresCHARM booklet
Key Terms:
5/1 ARMadjustable-rate mortgagefixed periodadjustment frequencyindexmarginrate capsSOFRpayment shock2/2/5 cap structure
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