Quick Definition

A 5/1 Hybrid ARM is a type of mortgage that features a fixed interest rate for the first five years, followed by an adjustable rate that resets every year thereafter.

Examples

• 1A homeowner purchases a home with a 5/1 Hybrid ARM at a 3% initial rate. After five years, the rate adjusts annually based on market conditions.
• 2An individual refinances their existing mortgage into a 5/1 Hybrid ARM to take advantage of lower initial rates compared to a 30-year fixed mortgage.
• 3A couple buys their first home with a 5/1 Hybrid ARM, planning to sell the house before the fixed-rate period ends to avoid potential rate increases.

Tags