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5 Year ARM Rate Mortgage
A 5 year ARM rate is fixed for the first 5 years and the start adjusting each year after that depending on what the current interest rates do. If the interest rates go up then so will yours and if they go down then yours will too.
The bank lets you know what the interest rate will be for the first 5 years. After the 5 years go by your rate will adjust to whatever the current interest rate is at that time. Then each year after that your rate will adjust again up to 2% per year with a cap of 6% total.
Having your interest rate increase by 6% would be drastic to your mortgage. If you had to get the 5 year ARM rate in the first place you probably could afford the standard fixed rate mortgage. So even having your interest rate increase by 2% could mean foreclosure.
You should use an interest calculator to show you what your new mortgage payment would be if it increased by 2% so that you understand how dramatic it is. Remember that all of that extra money you're paying will go straight to the bank without helping pay down principal at all.
A 5 year ARM rate probably isn't the best mortgage to get because there isn't much of a benefit to getting it. Right now you'll get about the same interest for a fixed rate mortgage so what's the point? All you're doing is gambling the interest rates and they are at an all time low so it's a pretty bad gamble. | 
