Based on your financial expertise, provide your response or viewpoint on the given financial question or topic. The response format is open.

5/1 ARM: Lifetime cap, First Adjustment Cap, Margin, and Annual Cap?
You quote a rate (2.75%) and then quote a margin (1.75%).  The margin is usually an addition to some base rate.  How is the margin expressed in the figures you have?  Is it included in the rate, or in addition to it? As for the other stuff, it looks like the rate can go up at most 1% per year, up to a maximum of 5% increase.  The first adjustment cap is also 1%.  That just says that your first rate increase is capped the same as subsequent increases. If the margin is already included, and the increases are based on your initial rate, then this puts you at a maximum of 7.75%. You must verify this.  I don't have your loan documents. And again, why would you want to risk an increase at all?  You have a decent fixed-rate mortgage already.  That still doesn't make sense to me.  Going from 2.75% to 7.75% as above can increase your monthly payment by over 40%.