What Is a 5/25 Mortgage?


A 5/25 mortgage could provide a solution for your home financing needs. As a product that contains both a fixed-rate and an adjustable-rate period, 5/25 mortgages are used for refinancing or buying a home. You can review the benefits of using a 5/25-mortgage against other home loan programs (see Resources).

Fixed-Rate Period

A fixed-rate period is offered on a 5/25 mortgage. The initial interest rate will not change during the first five years (60 months). A borrower who want a lower interest rate than the prevailing long-term interest rates, might consider a 5/25 mortgage if he plans to sell or refinance the home within five years of obtaining the mortgage loan. A 5/25 mortgage offers a longer fixed-rate solution than one- to three-year adjustable-rate mortgages.

Adjustable-Rate Period

An adjustable-rate mortgage (ARM) such as a 5/25 mortgage provides a borrower with a product that may increase annually, semiannually, monthly or even quarterly, once the fixed-rate loan period has ended. The terms of the ARM will determine the frequency of interest-rate adjustments. Borrowers who decide to obtain a 5/25 mortgage should have a plan for exiting the loan before the loan starts to adjust. During the first 60 months, you should concentrate on building your credit score and paying down your principal mortgage balance.

Hybrid Mortgage

Hybrid mortgages, such as a 5/25, 2/28 or a 3/27 mortgage, enable borrowers to receive a blend of the benefits that are offered for both fixed-rate mortgages and adjustable-rate mortgage loans. A borrower may chose a long-term fixed-rate mortgage loan for the comfort in knowing that her mortgage payment will not change, while another borrower who understands the risks of an ARM, might prefer to apply the monthly savings toward her principal balance. Hybrid loan programs offer flexible choices for individuals who are acceptable to certain risk factors.


Prior to accepting a 5/25 mortgage, you should discuss a variety of loan options with your banker or a home loan professional to explore the comparisons with other programs. A prudent approach could include inquiries about the costs, savings, risks and advantages of using a 5/25 mortgage based on your current situation or your future goals. You can ask questions about the loan terms, adjustment periods and the approximate monthly payment after you reach your first interest-rate adjustment.

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