If you are planning on only being in your home for five years or less, then a 5 year ARM might be the perfect choice for your home financing needs. 5 year adjustable rate mortgages have introductory rates that remain in place for the first five years (60 months) before adjusting up or down according to a designated index plus an assigned margin. These programs often carry a lower rate for the introductory period than a traditional 30 year fixed rate mortgage (although this is not always the case). Give the lenders, brokers, and banks in the rate survey on ForTheBestRate.com a call today to find out mortgage about their 5/1 ARM pricing and products.
Some 5 Year Adjustable Rate Mortgage Highlights
- Low introductory rate for the first five years of the mortgage
- 5 year ARM programs possibly a good choice for people planning on being in their homes for 3-7 years.
- Many have 5/2/5 caps which means the initial rate cannot go up or down more than 2% at the first adjustment period, 2% at any adjustment thereafter, and 5% total at any point during the 30 year term.
- May be available for primary residences, second homes, and investment properties.
- A minimum 620 credit score is typically required. Ask a lender or broker to their program guidelines.
- Low down payment 5 year ARM solutions may existing through FHA financing.
Compare 5 Year Adjustable Rate Pricing – View Today’s Rates
You can use ForTheBestRate.com to compare mortgage pricing and contact various mortgage companies for more information on their 5/1 ARM products including details on the loans’ caps, margins, and the indexes that the loans are tied to. Keep in mind that rates will likely change after the first five years and will continue to adjust in set intervals. You’ll want to verify all details of the loans with the various mortgage companies you speak to.
Weighing a 5/1 ARM vs. a 30 Year Mortgage
Occasionally, rates for 30 year mortgages may be lower than 5/1 year ARM pricing under certain market conditions. When this occurs, most borrowers would opt for the security of a fixed rate financing solution. The majority of the time, borrowers can realize significant savings with the low introductory rates associated with ARM financing. It’s a matter of risk vs. reward. The shorter the introductory rate term, typically the lower the rate. At the same time, the shorter the introductory rate term, the riskier the financing.
An ideal candidate for a 5 year ARM would likely be someone who plans on being in their property for 3-7 years, has solid job security, and whose home is in a stable or appreciating housing market. Borrowers who are considering an adjustable rate mortgage should also feel confident that they will be able to cover higher monthly mortgage obligations in case they are unable to refinance or sell their homes after their introductory rate periods comes to an end.
Still not sure of an ARM is right for you? Here are a few more adjustable rate products to research: