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Best 5/1 ARM Rates & Lenders

Updated Mar 01, 2022   |   8 mins read

When buying a home, you need to choose the right type of mortgage loan to make sure your monthly payments are affordable and that you pay a reasonable amount of interest over the life of the loan. One of the biggest decisions to make is whether to get a fixed- or adjustable-rate mortgage.

A 5/1 ARM is a specific type of adjustable-rate mortgage. The interest rate usually starts lower than the rate on a fixed-rate mortgage, and it remains the same for five years. After that, it can adjust once annually based on the financial index the rate is tied to.

Adjustable-rate mortgages are good for homebuyers who plan to sell or refinance their home within a few years and who want to take advantage of a lower starting interest rate. This guide will help you understand if a 5/1 ARM is right for you, as well as our picks for the best 5/1 ARM and lenders.

On this page:

LendEDU’s 5 Best 5/1 Mortgage Lenders

  1. Better
  2. New American Funding
  3. SoFi
  4. Guaranteed Rate
  5. Rocket Mortgage

1) Better

Simple, Online Mortgage

  • No extra fees or commission, ever
  • Instant loan estimates
  • Experience you can trust – Over $3 billion in total funded loans

Better aims to provide mortgage loans with no fees and to streamline the application process by allowing you to complete much of it online. You can upload supporting documents to Better’s web portal and close on your loan much more quickly than with many traditional banks and credit unions.

Here’s what you need to know about Better’s 5/1 adjustable-rate mortgage:

  • Minimum credit score: 620
  • Minimum down payment: 5%
  • Overall LendEDU rating: 5.00 / 5.00

Full Review: Better Mortgage Review

2) New American Funding

Your Mortgage, Your Terms.

  • Get pre-approved in as little as 48 hours
  • Complete the entire application process online
  • Choose from a wide variety of mortgage options

Although New American is family-owned, it’s also a major mortgage lender that provides a variety of different loan types including conventional and jumbo mortgages, adjustable-rate mortgages, VA loans, and FHA loans.

Much of the loan application process can be done online, but you also have the option of visiting loan officers in person throughout the country if you’d like direct assistance with your application.

Here’s what you need to know about New American’s 5/1 adjustable-rate mortgage:

  • Minimum credit score: Not Disclosed (620 estimated)
  • Minimum down payment: Not Disclosed (3% estimated)
  • Overall LendEDU rating: 4.72 / 5.00

Full Review: New American Funding Review

3) SoFi

10% down, 100% home

  • No hidden fees or prepayment penalties
  • Put as little as 10% down on loans up to $3 million
  • Exclusive member discounts

While best known for offering student loans, SoFi has grown into a major financial services provider in recent years. It now offers a wide variety of mortgage types, including both fixed and adjustable-rate mortgages.

SoFi allows you to start the mortgage application process online and it provides some perks that other lenders don’t, including special membership discounts on loans and financial advisory services to members.

SoFi’s interest-only 5/1 ARM allows you to make interest-only payments for the first 10 years, then you can pay principal and interest down over the remaining 20 years. This could help you afford your home while you’re still building your career, but it may cost you more over the long-term.

Here’s what you need to know:

  • Minimum credit score: Not disclosed (620 estimated)
  • Minimum down payment: 10%
  • Overall LendEDU rating: 4.44 / 5.00

Full Review: SoFi Mortgage Review

4) Guaranteed Rate

Positively Trusted.

  • Apply in minutes
  • Buy smarter with real-time neighborhood data
  • Trusted local experts – over 350 locations

Guaranteed Rate promises fee discounts for borrowers as well as a quick, easy online mortgage application and approval process. While Guaranteed Rate charges higher fees than some lenders, your total loan costs may still be competitive with loans from other conventional lenders.

You also have a choice of a wide variety of loan options with Guaranteed Rate, and you can get to closing quickly thanks to online document management tools.

Here’s what you need to know about Guaranteed Rate’s 5/1 adjustable-rate mortgage:

  • Minimum credit score: 620
  • Minimum down payment: Not disclosed (3% estimated)
  • Overall LendEDU rating: 4.39 / 5.00

Full Review: Guaranteed Rate Mortgage Review

5) Rocket Mortgage

A simpler way to buy a home or refinance.

  • Apply Online – Streamlined application available 24 hours a day, 7 days a week
  • Use RateShield Approval and lock in your rate for up to 90 days
  • Home Loan Experts available seven days a week to answer all your mortgage questions

Powered by Quicken Loans, Rocket Mortgage is an ideal choice if you want to complete the entire loan application and approval process online without having to talk to a loan officer.

You can get a variety of loans from Rocket Mortgage and can enjoy a quicker closing process than with many conventional mortgage lenders.

Here’s what you need to know about Rocket Mortgage’s 5/1 adjustable-rate mortgage:

  • Minimum credit score: Not disclosed (620 estimated)
  • Minimum down payment: Not disclosed (3% estimated)
  • Overall LendEDU rating: 4.34 / 5.00

Full Review: Rocket Mortgage by Quicken Loans Review

How We Chose the Best Lenders

LendEDU ranked and rated the best ARM mortgage lenders based on a weighted average of nine data points. These include:

  • BBB Rating (10%)
  • Trustpilot Rating (5%)
  • States Available (5%)
  • Lender Fees (15%)
  • Application Fees (15%)
  • Online Application (10%)
  • ARM Terms (20%)
  • Customer Support (10%)
  • Zillow Rating (10%)

5/1 ARM Rates

When you take out an adjustable-rate mortgage, your initial starting interest rate will be fixed for five years. Then it will convert to a variable rate that could move up and down with the financial index it is tied to.

With a 5/1 ARM, the 1 indicates that your rate can change once per year. Different lenders link their mortgage rates to different indexes, which commonly include:

  • The 11th District Cost of Funds Index
  • The one-year Treasury bill’s weekly constant maturity yield
  • The London Interbank Offered Rate

The individual rate you receive will also depend upon factors specific to you, including:

  • Your creditworthiness
  • The size of the home loan you are taking out
  • The size of your down payment
  • The location of the property you’re purchasing
  • Whether your home is a primary home, second home, or an investment property

Current 5/1 ARM Rate

Current Average 5/1 ARM RateAs of

Source: Freddie Mac

What is a 5/1 ARM Mortgage?

A 5/1 ARM is an adjustable-rate loan that offers a fixed-rate period of five years, then a variable-rate period for the remainder of your loan term.

The “1” indicates that your rate can change once per year after that for the remainder of the repayment term. Your repayment timeline is fixed—usually for 15 or 30 years—and your rate will change with fluctuations in the financial index it is linked to.

Alternatively, if you had a 7/1 ARM or 3/1 ARM, your initial interest rate would stay the same for seven or three years and could then change once annually.

In any case, your mortgage payment timeline never changes without refinancing your mortgage. So, if your interest rates go up, your monthly payments will need to increase so you stay on schedule with your predetermined loan term.

By comparison, a fixed-rate mortgage would offer you the same rate for the entire loan term. Your rate and payment amount wouldn’t ever change because the interest and principal amounts are amortized over the loan term.

Is a 5/1 ARM Mortgage Right for Me?

A 5/1 ARM is a good option if you plan to refinance your home or sell it within the first five years. You can take advantage of the lower interest rate now, then change loans or homes before the new rate kicks in.

The downside risk, though, is that if you’re unable to sell or refinance, you could face rate changes.

You should make sure you’re comfortable taking on the risk of a higher interest rate before you choose an adjustable-rate mortgage. Find out how high your payment could go and make sure you can afford the monthly mortgage payment in a worst-case scenario.

You should also make sure you can qualify for and afford 5/1 ARM based on:

  • Your credit score
  • The size of your down payment
  • The closing costs you’ll have to pay in addition to monthly mortgage costs.

Our mortgage calculator can help you get a better idea of what your monthly costs would look like.

When you’re ready, shop around and get pre-approved by several of the best mortgage lenders. This will help you see what rates you can qualify for, and comparing multiple lenders ensures you find the best rates.