On this page
Think about how long you will stay
A 30-year fixed-rate mortgage is the most popular home loan. But NAR’s 2025 Profile of Home Buyers and Sellers found that sellers had owned their homes a median of 11 years before selling. That median was a record high, and many people move sooner. A 5-year adjustable-rate mortgage may be a good option for some first-time home buyers who expect to move or refinance before the fixed period ends. If you choose a 5-year ARM but move within five years, you could benefit from a lower rate. You would never have to worry about your loan adjusting.
Check your home buying eligibility. Start here (Nov 5th, 2026)
What is a 5-year adjustable-rate mortgage?
An adjustable-rate mortgage (ARM) is a home loan that offers a low interest rate for an introductory period. That period typically lasts anywhere from three to 10 years. When that introductory period ends, the rate can rise or fall with its index.
A 5-year ARM usually has a 30-year loan term in total. Your low intro rate stays fixed for the first 5 years. After that, the second number in the name shows how often the rate can adjust. A 5/1 ARM adjusts once a year, and a 5/6 ARM adjusts every six months. Fannie Mae’s standard ARM plans use the six-month schedule. Similarly, a 7-year ARM has a fixed rate for the first seven years and a 10-year ARM for ten years.
Most ARMs have a cap on how high the rate can go.
ARMs are attractive to many buyers because initially, they offer lower mortgage rates than a fixed-rate loan. Depending on the introductory rate, the savings can be significant.
Let’s say you get a 30-year, fixed-rate mortgage of $300,000 at 5%. Your monthly principal and interest payment would be about $1,610. In contrast, take a 5-year ARM of $300,000 with an introductory rate of 4% and a 30-year term. Its monthly principal and interest payment would be approximately $1,432. Over the course of the first five years, you’d save a total of around $10,690. These rates are only an illustration, not current rates. Both payments leave out property taxes, homeowners insurance and mortgage insurance.
Pros & cons of a 5-year adjustable-rate mortgage
Pros of a 5-year ARM
A 5-year ARM offers these benefits:
- It has a lower initial interest rate and, therefore, a lower monthly mortgage payment in the early term than a fixed-rate mortgage.
- It allows you to save money. You can invest that money or put it toward financial goals like saving for retirement or paying off credit card debt.
- Because the initial rate is lower, you may be able to qualify for a more expensive home.
Click here to check 5-year ARM rates (Nov 5th, 2026)
Cons of a 5-year ARM
The primary drawbacks of a 5-year ARM include:
- The mortgage rate could increase substantially when the introductory period ends, raising your monthly mortgage payment.
- Your monthly payment may change frequently after the first five years. As a result, managing your household budget can become more difficult.
- ARMs are more complex loan products with respect to fees, caps, and structures than fixed-rate mortgages.
When a 5-year ARM might be best
First-time home buyers can be good candidates for a 5-year ARM if they plan to live in a starter home for a few years before they upsize. Their planned time in the home can then align nicely with a 5-year ARM and its monthly savings.
An ARM looks best when its rate is well below the 30-year fixed rate. So compare both on your own Loan Estimates.
A 5-year ARM can also be a wise option if you plan to sell your new home within five years. The same is true if you plan to pay off your mortgage in full in that time. Either way, the loan would end before its low introductory interest rate expires.
Check your home buying eligibility. Start here (Nov 5th, 2026)
5-year ARM FAQs
Is a 5-year ARM a good idea?
A 5-year ARM may be a great option if you know that you’re going to sell your home, pay off the mortgage, or refinance within five years. The introductory rate is usually lower than 30-year fixed mortgage rates. As a result, an ARM can save you money in interest over the first five years.
What is a 5-year ARM FHA loan?
The Federal Housing Administration insures FHA-backed mortgages. They’re geared toward consumers with poor credit or little savings for a down payment. With a credit score of 580 or higher, the down payment can be as low as 3.5%. Scores from 500 to 579 need at least 10% down.
The FHA offers what it calls “hybrid ARMs”: adjustable loans with a low initial interest rate for the first 3, 5, 7, or 10 years. After the initial period, the interest rate adjusts once a year. On a 5-year FHA adjustable-rate loan, the rate can rise by up to 1 percentage point a year with a 5-point lifetime cap. Depending on the product, it can instead rise by up to 2 points a year with a 6-point lifetime cap. The rate only rises if the index rises.
Is an adjustable-rate mortgage recommended for first-time home buyers?
ARMs can suit first-time buyers who expect to move to a larger home in a few years. That means they may be able to sell their house before their ARM’s interest rate can increase.
Conventional loan and rate questions
Is a 5-year ARM a conventional loan?
Generally, 5-year ARMs are conventional loans. A conforming conventional loan stays within the loan limits that the Federal Housing Finance Agency (FHFA) sets for Fannie Mae and Freddie Mac. (FHA-insured and VA-guaranteed ARMs are an exception.) In most of the country, the limit on a conforming loan is $832,750 for a single-family home. However, loan limits may be higher in areas with notably high home prices.
What are 5-year ARM rates?
ARM rates vary by lender and over time. Compare the ARM rate with the 30-year fixed rate on your own Loan Estimates, and check the cap structure. Your actual rate may vary depending on factors like your credit score, loan amount, and down payment.
