A 5-1 ARM is a loan where the rate is fixed for five years, then resets every year after that; a 7-1 ARM is a fixed rate for the first seven years and so on. Not all ARM rates reset every year – you might get a 7-2 ARM, for example, although annual adjustments are the most common.

How often do ARMs adjust?

With most ARMs, the interest rate and monthly payment change every month, quarter, year, 3 years, or 5 years. The period between rate changes is called the adjustment period.

What happens at end of 5 year ARM?

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 . Many ARMs are started with the interest rate fixed for three or five years. During that time the rate and payment will not change.