What's the 1 in a 10/1 ARM signify?

[IHateMyJob2004]

I know thath te 10 is the fixed rate period. What does the 1 signify?

 

[IHateMyJob2004]

Soemone has to know this

 

[FoBoT]

how often the rate is adjusted
i think

so a 10/1 is fixed for ten years and then adjusts each 1 year after that

maybe

 

[IHateMyJob2004]

Originally posted by: FoBoT
how often the rate is adjusted
i think

so a 10/1 is fixed for ten years and then adjusts each 1 year after that

maybe

I was thinking along those lines. Just hat I have never seen a 10/0.5 ARM and I know some are adjusted every 6 months.

Hrmmmm

 

[FoBoT]

The first number stands for the number of years in the initial fixed period, while the second indicates how often the new adjusted rate will remain in effect thereafter. A 3/1 ARM, for instance, has three years of fixed payments at one rate, followed by 12-month blocks of fixed payments interspersed with annual adjustments. The total loan term would be 30 years.

Text - Enjoy

 

[geecee]

Originally posted by: IHateMyJob2004

Originally posted by: FoBoT
how often the rate is adjusted
i think

so a 10/1 is fixed for ten years and then adjusts each 1 year after that

maybe

I was thinking along those lines. Just hat I have never seen a 10/0.5 ARM and I know some are adjusted every 6 months.

Hrmmmm

Adjust period is often based on the index that the ARM is tied to. ARMs tied to the 6 Month LIBOR usually adjust every six months. ARMs tied to 1 YR Treasury/1 YR LIBOR, usually adjust annually.

 

[Vic]

Originally posted by: IHateMyJob2004

Originally posted by: FoBoT
how often the rate is adjusted
i think

so a 10/1 is fixed for ten years and then adjusts each 1 year after that

maybe

I was thinking along those lines. Just hat I have never seen a 10/0.5 ARM and I know some are adjusted every 6 months.

Hrmmmm

That would be called a 10/6 LIBOR ARM. Fixed for 10 years, then adjusts every 6 months thereafter, indexed to the London Interbank Offered Rate (LIBOR).

A 10/1 Treasury ARM is fixed for 10 years, then adjust once every year thereafter, indexed to the 1-year Treasury Bill.

10 year hybrid ARMs usually have less-than-competitive rates compared to a straight 30 year fixed.