Most 5-year Adjustable Rate Mortgages have a 30-year amortization, that is, payments are calculated to pay off the loan in thirty years.

Most consumers go with a traditional 30-year fixed loan, but their financial situation changes over the course of time and they end up refinancing after 3 or 4 years. The rates on a 30-year loan are higher than a 5 year, so in some cases it makes better since to go with a 5 year.

This is a great type of loan for many homeowners for the simple fact that the average American sells or refinances within every 5 years. With that said it makes a lot of sense to look into obtaining a loan with a low fixed rate for 5 years versus taking on a 30 year fixed rate loan with a higher interest rate. Always explore your options as a borrower and if your mortgage broker does not present these different options to you ask if he/she can. Sometimes however there is very little difference in interest rates on some ARM's compared to a fixed rate loan and it may make more sense to just take the fixed 30 year mortgage.

There are two kinds of 5 year adjustable rate mortgages: the 5/1 and the 5/6. The 5/1 is a 5 year adjustable rate mortgage that adjusts annually or every 12 months after the 5 year introductory period is over. The 5/6 is a 5 year adjustable rate mortgage that adjusts every 6 months after the 5 year introductory period is over. Both of these 5 year adjustable rates mortgages can be fully amortized where you pay principal and interest or interest only where you only pay principal payments at your discretion.

Many lenders offer great rates on 5 year arms, and many times offer better rates than on lower term 2 and 3 year arms.