A year ago, 30-year fixed-rate financing was the name of the game. Recently, the adjustable-rate mortgage (ARM) made a comeback.
The 5/1 ARM is popular with some homebuyers and homeowners with equity who are refinancing. The attraction of a 5/1 ARM is that it offers a fixed rate for five years that is significantly lower than what is available on 30-year fixed-rate mortgages.
At the end of May, 5/1 ARMs were available from some lenders with interest rates as low as 3.75 percent with no points. Points refer to the loan origination fee: 1 point is equal to 1 percent of the mortgage amount. The interest rate on a 30-year fixed-rate loan was as low as 4.5 percent with 1 point. Interest rates vary from one location to the next, and not all mortgage products are available in every state.