How Do ARMS work?
Adjustable Rate Mortgages have a fixed rate for a specified period of time, usually between 1 and 10 years. After the fixed period, the rate can adjust. For example, if you see a mortgage that’s a 5/1 ARM, the first number, 5, is the number of years the initial rate stays fixed. The second number, 1, is how often the rate can adjust after the 5th year, in this case, annually. (So a 3/3 has a fixed rate for 3 years then adjusts every 3 years after that.) Just like with a fixed-rate mortgage, you can still plan to pay the mortgage off over a long time, up to 30 years, but the rate is initially fixed at a lower rate for a shorter period and then it adjusts annually after that.
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