A 5/1 hybrid adjustable-rate mortgage (5/1 ARM) begins with an initial five-year fixed-interest rate period, followed by a rate that adjusts on an annual basis. The 5 in the term refers to the number of years with a fixed rate, and the 1 refers to how often the rate adjusts after that (once per year). As such, monthly payments can go up—sometimes dramatically—after five years.
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