What Is A 5-2-5 ARM Loan?
Posted by @TopMortgageRate
What does "Conf ARM LIBOR 5/1 5-2-5" mean?
This means that the loan product is a 30 year term during which the first 5 years are at the fixed rate you're being quoted. After those first five years (60 months) are up, the loan will convert to an adjustable rate mortgage (ARM) for the remaining 25 years.
Each year during that time (that's where the "1" comes from) there will be a rate adjustment based on the index of the loan, plus a fixed margin. Once the loan begins its adjustments it will have rate caps. The first "5" in the "5-2-5" means that the rate can adjust no more than 5% over your start rate. The "2" means that each year from that point, the rate cannot adjust more than 2% (up or down) from the previous rate, and finally, the rate has a lifetime cap of 5% over the start rate.
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