Final answer:
An adjustable-rate mortgage (ARM) is a loan for purchasing a home with a varying interest rate. A 5/1 ARM has a five-year fixed rate followed by annual adjustments, and a 5/5 ARM has a five-year fixed rate with adjustments every five years.
Step-by-step explanation:
An adjustable-rate mortgage (ARM) is a type of home loan in which the interest rate applied on the outstanding balance varies throughout the life of the loan. Normally, the initial interest rate is fixed for a period of time, after which it resets periodically, often every year or even monthly. The 5/1 ARM is a type of ARM where the initial fixed interest rate period is five years, after which the rate adjusts every year. Similarly, a 5/5 ARM has a five-year initial fixed rate period, but the rate adjusts every five years thereafter.