A 5/1 ARM mortgage means the loan has:
Correct Answer
B) A fixed interest rate for the first 5 years, after which the rate adjusts once per year
In a 5/1 ARM, the '5' indicates the number of years the interest rate remains fixed at the initial rate, and the '1' indicates how frequently (in years) the rate adjusts after the fixed period ends. After the initial 5-year fixed period, the rate adjusts once per year based on a specified index (such as the SOFR) plus the lender's margin. ARMs typically include periodic and lifetime rate caps to limit how much the rate can change at each adjustment and over the life of the loan.
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