Want a lower starting mortgage rate? Here's what to know about 5/1 ARMs

Adjustable-rate mortgages, also known as ARMs, are home loans that start at a fixed rate for a set period, then adjust based on market conditions. ARMs can be a useful strategy for saving money when rates are high, but they come with risks.

With a 5/1 ARM — one of the most common types — borrowers will have a set rate for five years and then that rate will adjust once a year after. 

ARMs offer borrowers several key benefits. First, an ARM's initial rate is usually lower than what borrowers can get with a fixed-rate mortgage. In a high-rate environment, it can save you money. Additionally, if rates cool after the initial period, borrowers may automatically get a lower rate during the adjustment period. 

However, you can't predict where rates will go, and you could end up with a higher rate than one you were trying to avoid. In 2025, experts predicted rates would drop in 2026, but they've been rising since the Iran war began.

You can mitigate some of this exposure by preparing to refinance sooner than at the end of your introductory term and building flexibility into your budget in case rates jump — use CNBC Select's mortgage calculator (see below) to see what your payment would look like at a variety of rates. Additionally, be sure to consult with a housing counselor before deciding on an ARM.

Here's how a 5/1 ARM differs from similar types of rate structures and which lenders CNBC Select prefers. 

The main difference between these three ARM terms is the length of the initial fixed-rate period and how often the rate adjusts afterward.

The first number in an ARM term is the length of the initial period and the second is how often it will adjust after that time. In the case of 3/1, 5/1 and 7/1 ARMs — three very common types — the initial term is three, five and seven years, respectively. After that, the rate changes each year. 

Typically, the longer the initial period, the higher the introductory period rate. So a 3/1 ARM will have a lower initial rate than a 5/1 ARM, which will have a lower initial rate than a 7/1 ARM.  However, rates and terms vary by lender.

So if you're looking for the lowest possible rate — and you're not worried about potentially having to pay more in interest or refinancing in three years — a 3/1 ARM may be worth comparing. But if you want the most stable rate and more time before it changes, consider one of the other options. 

Most mortgage lenders offer ARMs alongside fixed-rate options, but not every one offers this specific rate structure. If you're set on a 5/1 ARM, ask your lender early on in the mortgage process. Here are some of our favorite lenders that offer 5/1 ARMs. 

Rocket Mortgage 

Rocket is one of the largest mortgage lenders in the U.S. and boasts an exceptional customer satisfaction record. It has an A+ from the Better Business Bureau and consistently ranks at the top of J.D. Power surveys. It also has an easy-to-use website.

New American Funding 

New American Funding is another excellent choice. It offers several assistance programs geared toward first-time homebuyers. It also has many in-person locations nationwide, so if you want to do your borrowing in person, this may be the option for you. 

First Federal 

If you're a veteran looking for a 5/1 ARM, consider First Federal. It specializes in VA loans and will provide up to $10,000 in down-payment assistance to qualifying borrowers. 

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every mortgage review is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of financial products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties and we pride ourselves on our journalistic standards and ethics.

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