5 year refinance rates explained and what to expect

What is a 5-year refi?

5 year refinance rates typically refer to a 5/1 ARM used for refinancing: you get a lower, often introductory rate fixed for five years, then the loan adjusts annually. In some markets, it can also mean a true five-year fixed term. Either way, the draw is a smaller payment upfront compared with longer fixed options, trading long-term certainty for near-term savings.

How these rates are set

Lenders price them based on credit score, loan-to-value, occupancy, discount points, and market benchmarks. Expectations for inflation, central bank moves, and yield curve shifts also matter. Paying points can trim the rate, but only helps if you keep the loan past the break-even.

Who might benefit

This structure can suit borrowers who plan to sell, refinance, or pay down aggressively within five to seven years, or who want to refinance quickly to capture cash flow relief now.

• Compare APR vs. rate and watch closing costs.
• Calculate your break-even on points and fees.
• Check ARM caps, margins, and adjustment indexes.
• Ask about prepayment penalties and recoup periods.
• Stress-test payments after the fixed window.