| North Palm Beach, Fla. -- Nov. 25, 2009 (Bankrate.com) -- Average rates on 5/1 interest-only ARMs in the United States rose 3 basis points to 4.40 on Wednesday, according to Bankrate.com's daily Your Best Interest report. A basis point is one-hundredth of a percent. The mortgages in the survey had an average of 0.59 discount and origination points.
A 5/1 interest-only ARM is an adjustable rate mortgage in which none of the payments go toward retiring principal for the first five years. Thereafter, it becomes an amortizing mortgage, with payments going toward both principal and interest, and it has an adjustment interval of one year. The adjustment is based on (or "indexed to") another rate -- often the yield on a Treasury note. Someone taking out a $165,000.00 5/1 interest-only ARM at the current average would pay $605.00 a month in interest for the first three years of the loan. After that point, the loan would convert to an adjustable-rate mortgage, with amortized principal and interest payments. The highest rate nationally on a 5/1 interest-only ARM was found at that charged 10.000 percent. The lowest rate was found at that charged 3.125 percent. Six months ago, the average rate in the U.S. was 4.95 percent. To see all of the results of Bankrate.com's surveys, go to www.bankrate.com. The Your Best Interest report is a daily service of Bankrate.com, a financial news and information service based in North Palm Beach, Fla. Bankrate surveys more than 300 financial products from more than 4,800 institutions in all 50 states. | 
