(5/1 ARM, 7/1 ARM, 10/1 ARM)

These increasingly popular Adjustable Rate Mortgages (ARMs)—also called 5/1, 7/1 or 10/1—can offer the best of both worlds: lower interest rates (like ARMs) and a fixed payment for a longer period of time than most adjustable rate loans.

 

For example, a "5/1 loan" has a fixed monthly payment and interest for the first five years and then turns into a traditional adjustable-rate loan, based on then-current rates for the remaining 25 years.

 

It's a good choice for people who expect to move (or refinance) before or shortly after the adjustment occurs.