Best 5/1 ARM Loans

Home buyers have many choices at hand when selecting the right mortgage, including the 5/1 ARM, a loan that is a hybrid of fixed-rate and adjustable-rate loans. If you’re considering this type of financing for your next house, one thing that you’ll want to consider is the fixed rate, so it’s important to know what the best 5/1 ARM mortgage rates are on the market today, as well as other considerations should keep in mind when picking out a lender. Do your homework and you’re bound to come up with an answer that works best for your situation and your dream home.

The 3 Best 5/1 Adjustable Rate Mortgages of 2020

  • Chase — Best for fair credit
  • Quicken Loans — Best for online shoppers
  • Guild Mortgage — Best for flexibility
ProviderMinimum down paymentMaximum LoanMinimum Credit Score
Chase3%$5,000620
QuickenLoans3%$3,000,000580
Guild Mortgage3.5%$3,000,000580

What are 5/1 ARMs?

The 5/1 ARM mortgage, also called a 5-year ARM, is a hybrid loan that’s both an adjustable-rate mortgage and a fixed-rate mortgage. How can that be? Well, your loan will have a fixed rate for the first five years, which guarantees a lower rate while you’re paying off the first part of your loan. After those five years it changes to an adjustable- or variable-rate mortgage and the rate can change one time each year until the loan is paid off. This generally results in the rate going up, so you could end up having a larger mortgage payment after those first five years. Since most 5-year ARM mortgages are 30-year mortgages, you’ll have 5 years of steady rates and 25 years of unknown rates to deal with.

5/1 ARM vs 30-year Fixed Rate Mortgage

The benefits of the 5/1 ARM mortgage is that it starts out with very low rates, especially when compared to a traditional 30-year fixed mortgage. That low initial rate makes the 5/1 ARM more attractive to some buyers. But while the 30-year mortgage may have a higher rate, it’s more predictable over the long term, and the rate never changes because it’s fixed. It’s hard to know if you’ll pay more with an ARM or a fixed-rate mortgage over the life of your mortgage, but it’s always possible to refinance a 5/1 ARM mortgage if it becomes too unmanageable.

5/1 ARM vs 5/5 ARM

At first glance, there isn’t a big difference between the initial rates for a 5/1 ARM mortgage and a 5/5 ARM mortgage because they work in a similar manner. Both start out with a low fixed rate for the first five years of the loan and then transition to a variable-rate mortgage. The 5/1 ARM, however, has a rate that adjusts annually, and goes up or down depending on the market. The variable rate portion of a 5/5 ARM mortgage only adjusts every 5 years. What’s best for you depends on whether you like the idea of a more responsive mortgage with more frequent opportunities to save or possibly even pay more, and the length of time you plan to be in your home.

The 3 Best 5/1 ARM Mortgages

Chase – Best for fair credit

Chase has been servicing mortgages for quite a long time, and the 5/1 ARM mortgage rates are just one reason to consider this lender for your home finance needs. Chase considers applications for buyers with a credit score as low as 620, and it is a flexible option for some of the most competitive rates on the market. You can start the process online, but you’ll need to finish signing on your loan at a physical branch with a representative. This lender offers a wide range of mortgage options in addition to the ARM loans, including fixed-rate options with down payments as low as 3% of the purchase price.

QuickenLoans – Best for online shoppers

If you’re not a fan of meeting a banker in person, you’ll likely love the process QuickenLoans has developed for home buyers. The entire mortgage process is completed online and applicants are able to start shopping with the Rocket Mortgage app. Everything from approval, closing and account maintenance is done via the web. You can apply for mortgages up to $3 million and buyers with credit scores as low as 580 may be eligible for some loan products.

Guild Mortgage – Best for flexibility

While you may think you’re in the market for an ARM, it’s possible a different loan solution may be a better fit. In that case, it’s wise to work with a lender like Guild Mortgage. This lender has over 57 years in the industry, working with people through all kinds of home loan programs, including the 5/1 ARM mortgage program. The experienced lending reps at Guild Mortgage have extensive knowledge on what each program offers and can help you search around until you find the right loan for you. Those with credit scores of 580 and above who have 3.5% for a down payment may qualify.

The Final Word

Home shopping is difficult enough without having to know all the ins and outs of mortgages. Thankfully, the 5/1 ARM mortgage rate structure isn’t as complicated as it seems. You might get the lowest rate available for five full years, then pay more or less over the remainder of the loan. ARMs are a solid pick for buyers who are planning on refinancing and are a popular pick for plan to move during the first few years of their loan or are buying an investment property. Deciding whether a 5/1 ARM mortgage works for you will take some careful consideration, but if you choose the right lender, you can move ahead with confidence in whatever choice you make.

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