5/1 interest-only jumbo refinance ARM

5/1 interest-only jumbo refinance ARM

A 5/1 interest-only jumbo refinance ARM (adjustable-rate mortgage) has several defining characteristics. As a refinance, it replaces an existing mortgage loan. The term "jumbo" means the loan amount exceeds the maximum that Fannie Mae and Freddie Mac can purchase or guarantee. The term "5/1 interest-only" refers to the rate and repayment structure: During the first five years of the loan, the debt carries a fixed interest rate, and the payments do not reduce the principal balance. Thereafter, the debt converts to an amortizing loan, with monthly payments consisting of principal and interest, and an adjustable rate. The interest rate is then adjusted once annually.