Definition
A 5/6 ARM is a home loan with a fixed interest rate for the first 5 years. After that, the rate changes every six months for the rest of the loan period.
Understanding 5/6 ARM Basics
A 5/6 adjustable-rate mortgage typically emerges during the loan selection phase. It starts with a fixed rate for five years, then adjusts every six months. This can help plan for short-term stability with potential rate changes later. Example: If the initial rate is 3% on a $200,000 loan, payments stay constant for five years before adjusting. It may be ideal for those expecting changes in their financial situation. It's not a fixed-rate mortgage, so after five years, payments can fluctuate based on market conditions.
