A 5/1 adjustable rate mortgage (5/1 ARM) is an adjustable-rate mortgage (ARM) with an interest rate that is initially fixed for five years then adjusts each year. The “5” refers to the number of initial years with a fixed rate, and the “1” refers to how often the rate adjusts after the initial period.

A 5/1 ARM is a mortgage with a fixed rate for the first 5 years of the loan, after which it adjusts up or down once per year based on the movement of a market-driven index, subject to caps on increases.

Which of these describes how a 5/1 ARM mortgage works? The monthly payment is one-fifth of the total purchase price of the house. The interest rate is fixed for five years and then changes every year afterward. Government mortgages charge lower interest rates than conventional mortgages.

This means that after making the monthly payment as planned for 30 years, the mortgage will be paid off, the ARM will end and the homeowner will own the home free and clear. Most ARMs reset the interest rate of the loan once a year on the loan anniversary date. The final period is the initial or teaser period .

You can pay off an ARM early, but not without some careful planning. Hence, any additional principal payments you made during the first 5 years would result in a lower monthly payment, but no change in term.

Refinancing can be done for many reasons, but switching from an adjustable-rate mortgage (or ARM) to a fixed-rate mortgage is one of the most common. The general rule of thumb is that refinancing to a fixed-rate loan makes the most sense when interest rates are low.

1. Switch to a biweekly payment. Instead of making one monthly payment toward your mortgage loan, you can make a half-sized payment every two weeks resulting in extra payments during the year.
2. Make extra principal payments.
3. Refinance into a shorter-term loan.
4. Put your windfalls into your mortgage.

Although the interest portion decreases each month, the mortgage payments themselves do not decrease over time. As a result, as the years go by, more of the homeowner’s payment goes toward principal, accelerating the rate at which the homeowner builds equity and decreasing the amount owed.

My fiancée’s understanding is that mortgage payments necessarily go down over time: the more you pay off the principal, the less you pay in interest, and therefore the total payments are reduced.

You have an escrow account to pay for property taxes or homeowners insurance premiums, and your property taxes or homeowners insurance premiums went up. If your monthly mortgage payment includes the amount you have to pay into your escrow account, then your payment will also go up if your taxes or premiums go up.