What is a 5/1 adjustable rate mortgage?

A 5/1 adjustable rate mortgage has a fixed interest rate for the initial five years of the loan. In the sixth year, the loan is subject to adjust to a higher or lower interest rate. The prime rate index will determine the adjustment for the interest rate on an annually basis for the remaining life of the loan. The cap structure for the 5/1 adjustable rate mortgage will define the initial interest rate, the limit to how much an interest rate can adjust, and the total adjustment limit over the lifespan of the loan.

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