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Compare 5-year mortgages

With sky-high monthly payments, this loan is best for high-income earners and investors.

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Katia Iervasi
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Name Product Loan products offered State availability Min. credit score
SoFi
(NMLS #1121636)
SoFi
Conventional, Home equity, Refinance
Not available in: HI, MO, NM, NY, WV
620
No hidden fees, multiple loan terms, and member discounts available.
See rates
More Info
Rocket Mortgage
(NMLS #3030)
Rocket Mortgage
Conventional, Jumbo, FHA, VA, Refinance
Available in all states
620
Streamline your mortgage from quote to final payment — all from your computer or phone.
See rates
More Info
Better
(NMLS #330511)
Better
Conventional, Jumbo, FHA, Refinance
Not available in: HI, MA, MN, NV, NH, VT, VA
620
Online preapproval in minutes and no origination fees with this direct lender.
See rates
More Info
LendingTree
(NMLS #1136)
LendingTree
Conventional, Jumbo, FHA, VA, USDA, Home Equity, HELOC, Reverse, Refinance
Available in all states
620
Connect with vetted home loan lenders quickly through this online marketplace.
See rates
More Info
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A five-year mortgage is the shortest loan on offer. The interest rates are incredibly low, but you’ll pay much more each month than you would if you had a longer term. If you can afford the payments, it could be an attractive option.

Compare 5-year mortgages

How does a 5-year mortgage rate compare to 15- and 30-year mortgages?

A five-year mortgage is paid off in only five years. This term is unpopular among homebuyers because of the high monthly payments, making it rare for lenders to offer it.

The most advantageous aspect of a five-year mortgage is the low, fixed interest rate. In a lender’s mind, a borrower is less likely to default on a five-year loan than a 20- or 30-year loan. That’s because borrowers need to meet strict eligibility requirements and be in an excellent financial situation to score a five-year mortgage in the first place.

The rate you’ll pay hinges on several factors, such as your credit score, income, down payment and the purchase price of the home. Since five-year mortgages are so rare, lenders don’t advertise their rates — but you can expect them to be between 1 and 1.5 points lower than that of a longer loan.

When people talk about a 5-year mortgage, they’re often referring to a 5/1 ARM.

A 5/1 ARM is actually a 30-year mortgage with a fixed rate for the first five years. After that, the interest rate can change each year for the rest of the loan period. As a result, you lose the predictability that comes with steady monthly payments — yours may change to match market conditions.

Unlike five-year fixed-rate mortgages, many lenders offer 5/1 ARMs.

What are the benefits of a 5-year mortgage?

A 5-year mortgage offers a few useful benefits for homeowners, including:

  • Low interest rates. The shorter the loan term, the lower the interest rate. For 5-year FRMs, you’ll most likely score a rate that’s 1 to 1.5% lower than that of a 15- or 30-year loan.
  • Significant interest savings. On that note, you’ll save thousands — or even hundreds of thousands — of dollars in interest over the life of the loan.
  • Predictable payments. With a 5-year FRM, you’ll pay the same amount each month for the life of the loan. This makes it easier to budget, and eliminates the risk of an increase of payments if interest rates rise.
  • Build home equity faster. Since the loan is so short, you’ll pay down the principal balance, increase (and unlock) your equity and be debt-free much quicker than most borrowers.

What should I watch out for?

Taking out a 5-year mortgage also has its potential pitfalls:

  • High monthly payments. The loan is condensed, so you can expect to pay hundreds or thousands more per month than you would for a 15-, 20- or 30-year mortgage.
  • Tough eligibility requirements. To ensure you can make the monthly payments, you’ll need to prove you have sufficient income, an excellent credit score and a positive credit history.
  • Hard to find. 5-year FRMs are rare, and lenders who offer them often don’t publish their rates online. If you’re interested, you’ll need to shop around.
  • Fewer tax perks. Paying less interest is great for your bank account, but it does mean a lower mortgage interest deduction.
  • Bigger financial responsibility. You may have less money to cover unexpected expenses or participate in investment opportunities.

Is a 5-year mortgage right for me?

Before debating the pros and cons, you need to figure out if you can get a five-year mortgage. Since the monthly payments are often thousands of dollars more per month, lenders have high standards. The eligibility requirements vary between lenders, but you’ll most likely need an excellent credit score, a low debt-to-income ratio, a larger down payment and proof of cash reserves.

Thanks to these requirements, five-year mortgages are usually only accessible for high-income borrowers who can afford the hefty payments. These mortgages also suit those who want to focus on paying off their home over channeling their money into other investments.

Bottom line

The five-year mortgage is all about extremes: low interest rates and high monthly payments. It’s hard to qualify for, so it’s usually reserved for high-income borrowers who can easily meet lender requirements.

If you’d prefer a more flexible loan, explore your options with our guide to mortgages.

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