5/1 ARM Mortgage Rates

About 5/1 arm loans

A 5/1 ARM fixes the rate for five years, then adjusts once a year against an index plus a margin. The initial rate is usually below the 30-year fixed, which is the entire appeal.

What matters most are the caps: the initial adjustment cap, the periodic cap and the lifetime cap. A 2/2/5 structure means the first adjustment can move up to two points, each subsequent one up to two, and the rate can never exceed the start rate plus five.

Rate versus APR

The interest rate sets your monthly payment. The APR folds in points, lender fees and any mortgage insurance, which makes it the right number for comparing two offers. A lower rate paired with higher fees often costs more over the life of the loan.

Frequently asked questions

Is an ARM risky?

It is a bet that you will sell, refinance, or absorb a higher payment before the fixed period ends. If you are confident about a five-year horizon it can save real money; if your plans might change, the payment shock after year five is a genuine risk.

What happens after the fixed period?

The rate resets annually to the index plus your margin, bounded by the caps. It can rise or fall, but the caps limit only how fast, not whether.