What is typically the length of time for the fixed rate period in a 5/1 ARM?

What is typically the length of time for the fixed rate period in a 5/1 ARM?

• A. 1 year
• B. 3 years
• C. 5 years
• D. 7 years

Answer: (C)

In the context of a 5/1 adjustable-rate mortgage (ARM), the "5" indicates that the interest rate is fixed for the first five years of the loan. This means that for the initial five-year period, the borrower will have a stable interest rate, allowing for predictable monthly payments. After this fixed-rate period, the "1" signifies that the interest rate may adjust annually based on market conditions. Thus, the correct answer reflects the common structure of a 5/1 ARM, where the length of time for the fixed-rate period is indeed five years.

In the context of a 5/1 adjustable-rate mortgage (ARM), the "5" indicates that the interest rate is fixed for the first five years of the loan. This means that for the initial five-year period, the borrower will have a stable interest rate, allowing for predictable monthly payments. After this fixed-rate period, the "1" signifies that the interest rate may adjust annually based on market conditions. Thus, the correct answer reflects the common structure of a 5/1 ARM, where the length of time for the fixed-rate period is indeed five years.