The difference between a 5/1 ARM and a 5/6 ARM is what happens after the initial five-year period. A 5/1 can adjust annually, while a 5/6 can adjust every six months.
Both are types of adjustable-rate mortgages, and neither keeps the initial interest rate for the full mortgage term.
Because the initial fixed periods are similar, comparing these loans requires looking closely at the adjustment schedule and rate caps rather than focusing only on the starting rate.
5/1 ARM vs. 5/6 ARM Basics
| Feature |
5/1 ARM |
5/6 ARM |
| Initial fixed period |
About 5 years |
About 5 years |
| Adjustment frequency afterward |
Once per year |
Every 6 months |
| Index |
Depends on the loan |
Depends on the loan program |
| Margin |
Set by the loan terms |
Set by the loan terms |
| Initial adjustment cap |
Depends on the loan |
Depends on the loan plan |
| Later adjustment caps |
Depend on the loan |
Depend on the loan plan |
| Main difference |
Less frequent adjustments |
More frequent adjustments |
If you expect to pay off the mortgage before the initial fixed period ends, the difference between annual and six-month adjustments may never affect your payment.
If you expect to keep the loan longer, compare how quickly each loan could move under its actual caps.
How a 5/1 ARM Works
A 5/1 ARM starts with an initial fixed-rate period of about five years.
After that, the “1” means the interest rate can adjust once per year.
The adjusted rate generally reflects an index plus the mortgage's margin, subject to the caps written into the loan agreement.
The CFPB explains that the index changes with market conditions, while the margin is set in the loan agreement and generally stays the same after closing.
A 5/1 does not identify the index or caps by itself. Two 5/1 ARMs can have different adjustment terms.
How a 5/6 ARM Works
A 5/6 ARM also begins with an initial fixed period of about five years.
Its rate can then adjust every six months rather than annually.
Current Fannie Mae standard 5/6 ARMs use the 30-day average Secured Overnight Financing Rate, or SOFR, as the index.
Fannie Mae's Standard ARM Plan Matrix identifies its 5/6 ARM as Plan 4927. That plan currently permits a first rate change of up to 2 percentage points, later six-month changes of up to 1 point and a lifetime increase of up to 5 points above the initial rate.
Those are Fannie Mae Plan 4927 terms. A 5/6 offered under another loan program can have different caps or other features.
Six-Month vs. Annual Adjustments
A 5/6 can adjust twice as often as a 5/1 after the fixed period, but frequency alone does not tell you which loan can change faster.
The cap structure matters just as much.
The CFPB identifies three important limits: the initial adjustment cap, subsequent adjustment cap and lifetime cap.
Consider two hypothetical $400,000 mortgages that both start at 6.25%.
Assume the 5/1 uses a hypothetical 2/2/5 cap structure, meaning a maximum 2-point first adjustment, 2-point annual changes afterward and a 5-point lifetime increase.
For comparison, use Fannie Mae's current 2/1/5 structure for its standard 5/6 plan.
| Time After First Adjustment |
Hypothetical 5/1 Maximum Rate |
Fannie Standard 5/6 Maximum Rate |
| First adjustment |
8.25% |
8.25% |
| 6 months later |
8.25% |
9.25% |
| 1 year later |
10.25% |
10.25% |
| 18 months later |
10.25% |
11.25% |
| 2 years later |
11.25% |
11.25% |
The 5/6 makes smaller subsequent moves in this example, but it can make them more frequently.
That means a smaller per-adjustment cap does not automatically make the loan less volatile over a multiyear period.
Compare how quickly the loan could reach its lifetime maximum rather than comparing only the size of one adjustment.
Why 5/6 ARMs Became More Prominent
The shift from older ARM structures to current six-month products is connected to the mortgage industry's transition away from LIBOR and other legacy indexes.
In 2020, Fannie Mae announced that it would stop acquiring LIBOR-indexed ARMs and introduced new ARM plans based on a 30-day average of SOFR.
Fannie Mae's transition guidance introduced SOFR-based 3/6, 5/6, 7/6 and 10/6 ARM plans.
Fannie Mae later retired its Constant Maturity Treasury, or CMT, ARM plans as well.
This helps explain why current agency ARM structures look different from many older products. Fannie Mae's current standard matrix includes 5/6, 7/6 and 10/6 structures rather than a standard 5/1.
What If You Already Have a Legacy 5/1 ARM?
An existing 5/1 ARM does not automatically become a 5/6 because its original index was discontinued.
The adjustment schedule and the index are separate parts of the loan contract.
The CFPB explains that the transition away from LIBOR generally involved replacing the index rather than changing the existing schedule of rate adjustments.
If you have an older ARM, check the mortgage documents and notices from your servicer to identify the current replacement index, margin, adjustment schedule and caps.
Do not assume the terms of a newly originated SOFR-based 5/6 apply to an existing 5/1.
How the First Adjustment Can Change Your Payment
Both structures can expose you to payment increases when the fixed period ends.
Using the same hypothetical $400,000 loan at 6.25%, the initial monthly principal-and-interest payment is about $2,463.
After five years of scheduled payments, the remaining balance would be about $373,349.
If the first adjustment moved the rate to 8.25%, the payment would rise to about $2,944 based on the remaining balance and 25 years left on the loan.
The first adjustment would therefore increase monthly principal and interest by about $481 in this example.
An ARM risk calculator can model the actual terms of your loan rather than relying on a hypothetical cap structure.
More Frequent Adjustments Can Move in Either Direction
Six-month adjustments create more opportunities for the rate to change, but those changes are not automatically increases.
If the applicable index decreases enough, the rate may fall at an adjustment, subject to the loan's terms and any applicable floor.
If the index rises, the caps determine how quickly the mortgage can follow it.
This is why the question is not simply whether annual or six-month adjustments are preferable. You need the index, margin and cap structure to understand the possible path of the rate.
How the Rate Environment Changes the Comparison
An ARM does not automatically start below a comparable fixed-rate mortgage.
Pricing changes with market conditions and can differ by lender and borrower.
If a 5/1 and 5/6 are quoted with similar initial rates and costs, the adjustable-period terms become a larger part of the comparison.
If one carries a meaningful pricing advantage, calculate the dollar savings during the initial five-year period before weighing later rate risk.
The same principle applies when considering an ARM when mortgage rates are elevated.
ARMs on Investment Properties
ARM structures can also appear in investment-property and non-QM financing.
Those loans may have different indexes, caps and qualification requirements from conventional agency ARMs.
Some investment-property products can also combine an adjustable rate with an interest-only period. In that case, you need to track two separate changes: when interest-only payments end and when the interest rate becomes adjustable.
Interest-only investment property mortgages should therefore be evaluated based on their full payment schedule rather than the ARM label alone.
Compare Both With a Fixed-Rate Mortgage
| Feature |
5/1 ARM |
5/6 ARM |
30-Year Fixed |
| Initial fixed period |
About 5 years |
About 5 years |
Full term |
| Later adjustment frequency |
Annual |
Every 6 months |
No rate adjustments |
| Index and caps |
Depend on loan |
Depend on loan program |
Not applicable |
| Future rate uncertainty |
Yes |
Yes |
No interest-rate adjustment risk |
If either ARM offers only a small initial pricing difference from a fixed-rate mortgage, calculate the actual payment savings before accepting future rate risk.
An adjustable- versus fixed-rate mortgage comparison should use the same loan amount, borrower assumptions, points and quote date.
Why Borrowers Consider ARMs
The potential benefit of an ARM is generally concentrated in its initial fixed period.
If the initial rate or costs are lower and you expect to pay off the mortgage before adjustments begin, those savings can be measured without relying on a prediction of future rates.
Those are among the potential advantages of adjustable-rate mortgages.
If you expect to keep the loan beyond year five, the adjustment terms become increasingly important.
Plan for the End of the Fixed Period
Before taking either ARM, consider three possibilities:
- You sell the property before the first adjustment.
- You refinance into another mortgage if you qualify.
- You keep the ARM and make payments based on its adjusted rate.
Refinancing from an ARM into a fixed-rate mortgage can be an option, but it depends on future rates, equity, income, credit and available loan programs.
A refinance should not be treated as guaranteed.
5/1 ARM vs. 5/6 ARM by Expected Timeline
| Expected Time With the Mortgage |
What to Compare |
| Less than 5 years |
Initial rate, points, fees and total cost before either loan adjusts |
| 5 to 7 years |
Adjustment frequency, first and subsequent caps, and possible payment changes |
| More than 7 years |
Lifetime caps, longer-term adjustment risk and fixed-rate alternatives |
| Uncertain |
Maximum payment exposure and how quickly each ARM can reach it |
Your expected timeline does not determine which loan will cost less. The actual pricing and adjustable-rate terms still need to be compared.
Run Both Scenarios
Use an ARM calculator with the actual terms in each quote.
Enter the initial rate, fixed period, adjustment frequency, index, margin and all applicable caps.
For a 5/1 versus 5/6 comparison, pay particular attention to how frequently later changes can occur and how large each change can be.
Get Comparable Quotes
Compare the loans using the same loan amount, borrower profile, points or credits and lock period.
Get the quotes at approximately the same time so market movement does not create a misleading difference.
The same normalization is necessary when comparing mortgage rates between lenders.
Other ARM Comparisons
A 5/1 vs. 7/1 ARM keeps annual adjustments but changes the initial fixed period.
A 5/1 vs. 10/1 ARM creates a five-year difference in initial fixed-rate protection.
A 7/1 vs. 10/1 ARM compares two longer annual-adjustment structures.
A 5/6 vs. 7/6 ARM keeps the six-month adjustment structure but compares five versus seven initial fixed years.
Bottom Line
A 5/1 ARM and 5/6 ARM have similar initial fixed periods but different adjustment schedules. A 5/1 can change once per year after year five, while a 5/6 can change every six months.
More frequent adjustment does not automatically mean a riskier or less risky mortgage. Compare the first-adjustment cap, later caps, lifetime cap, index and margin together.
For new conventional agency financing, current Fannie Mae standard ARM products use SOFR-based six-month adjustment structures, including the 5/6. A legacy or nonagency 5/1 can have different terms and should be evaluated using its actual loan documents.
FAQ
Is a 5/1 ARM Better Than a 5/6 ARM?
Neither is universally better. Both have similar initial fixed periods, but a 5/1 adjusts annually afterward while a 5/6 adjusts every six months. Compare their initial rates, costs, index, margin and caps to determine how the two loans could behave after the fixed period.
What Happens After the Fixed Period on a 5/1 ARM Ends?
A true 5/1 ARM can begin adjusting once per year after its initial fixed period. The new rate generally reflects the loan's index plus its margin, subject to its adjustment caps. Your payment is then recalculated using the adjusted rate, remaining balance and remaining term.
How Often Does a 5/6 ARM Adjust?
A 5/6 ARM can adjust every six months after its initial fixed period ends. That does not mean the rate necessarily changes at every adjustment. The index, margin and caps determine the new rate, and the rate can move up or down subject to the mortgage's terms.
Can You Refinance Out of an ARM Before It Adjusts?
Yes, if you qualify for another mortgage. Refinancing before the initial fixed period expires can prevent you from reaching the adjustable period, but future rates and eligibility are unknown. Income, credit, equity, property value, closing costs and available loan programs can affect the refinance.
What Are the Caps on a 5/6 ARM?
Caps depend on the loan program. Fannie Mae's current standard 5/6 ARM plan allows a first rate change of up to 2 percentage points, later six-month changes of up to 1 point and a lifetime increase of up to 5 points above the initial rate.
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