Official Credit Union of UMass Athletics

Official Credit Union of UMass Athletics

5/1 Variable Rate 30 Year Mortgage

For the current rate on the 5/1 Adjustable Rate Mortgage, please click here.

An adjustable rate mortgage, or an "ARM" as they are commonly called, is a loan type that offers a lower initial interest rate than most fixed rate loans. The trade-off is that after the first five years the interest rate can change periodically, usually in relation to an index, and the monthly payment will go up or down accordingly. For many people in a variety of situations, an ARM is the right mortgage choice, particularly if your income is likely to increase in the future or if you only plan on being in the home for the next few years.

With a 5/1 ARM, the interest rate and monthly payment are fixed for five years. The interest rate will not change for the first five years (the initial adjustment period) but can change every year after the first five years. Typically, a low-rate 5/1 ARM allows you to pay off your mortgage in a shorter period of time. For those best served by this type of loan, this means you don’t have to wait 30 years to pay off your mortgage.

Possible scenarios where it may be better to go with the 5/1 ARM over a Fixed Rate Mortgage:

Do you plan to live in your house for a short period of time?
The possibility of rate increases wouldn’t have much of an impact if you plan to sell the home within a few years.

Will you be getting a raise in income soon?
An increase in income can help cover the higher payments that result from possible rate increases.

Are you near retirement and looking to refinance?
If you know you will be selling your home and retiring in a few years, you could take the money you would save with a 5/1 ARM and put it into a retirement account.

OR perhaps you simply want the opportunity to save money on your monthly payments and therefore making it possible for you to shorten the term of your mortgage.

For questions or assistance, contact a friendly UMassFive representative today!

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