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When financing a high-value property with a $2 million jumbo loan, choosing the right mortgage structure can significantly impact your monthly payments and overall cost of borrowing. Two popular options are the 5/6 Adjustable-Rate Mortgage (ARM) and the 30-year fixed-rate mortgage. Each loan type serves a different financial strategy, risk tolerance, and time horizon. Here’s how they compare.
What Is a 5/6 ARM?
A 5/6 ARM is a type of adjustable-rate mortgage where the interest rate is fixed for the first five years, and then adjusts every six months based on a specific index (commonly the SOFR or Treasury index) plus a margin. The adjustment can either increase or decrease your interest rate.
Key Features:
- Fixed rate for the first 5 years
- Rate adjusts every 6 months afterward
- Lower initial rate than fixed loans
- Caps on rate adjustments to limit volatility
What Is a 30-Year Fixed-Rate Mortgage?
A 30-year fixed-rate mortgage locks in your interest rate and monthly payments for the full 30-year term. It offers long-term stability, regardless of market fluctuations.
Key Features:
- Same interest rate for the life of the loan
- Predictable monthly payments
- Ideal for buyers planning to stay long-term
How a $2 Million Jumbo Loan Affects Your Options
Jumbo loans exceed conforming loan limits set by Fannie Mae and Freddie Mac, making them riskier for lenders. As a result, they typically have stricter credit requirements and may carry higher interest rates. Whether you’re considering a 5/6 ARM or a 30-year fixed, the jumbo loan status adds complexity to the decision.
Learn more about jumbo loan requirements here
Comparing Costs: ARM vs Fixed on a $2 Million Loan
| Mortgage Type | Initial Interest Rate | Monthly Payment (Est.) | Long-Term Cost Risk |
| 5/6 ARM | 5.25% (intro rate) | ~$10,980 (first 5 years) | High (after year 5) |
| 30-Year Fixed | 6.50% | ~$12,640 | Low (locked in) |
Rates are illustrative and vary based on lender, credit score, down payment, and market conditions.
The 5/6 ARM can save you over $1,600/month initially, but after the five-year mark, your rate may increase significantly. On the other hand, the 30-year fixed ensures predictability and peace of mind, especially in rising-rate environments.
Who Should Choose a 5/6 ARM?
- Planning to sell or refinance within 5–7 years
- Expect rising income or career changes
- Comfortable with potential rate increases
- Looking for lower initial payments
Who Should Choose a 30-Year Fixed?
- Planning to stay in the home long-term
- Prefer payment stability
- Concerned about rate hikes
- Conservative risk profile
Pros and Cons
5/6 ARM
Pros:
- Lower initial interest rate
- Lower monthly payments early on
- Good for short-term ownership
Cons:
- Uncertain future rates
- Potential for higher payments later
30-Year Fixed
Pros:
- Rate stability
- Budgeting simplicity
- Ideal for long-term holders
Cons:
- Higher starting rate
- Less flexibility
Final Thoughts
Choosing between a 5/6 ARM and a 30-year fixed mortgage on a $2 million jumbo loan depends on your financial goals, risk appetite, and how long you plan to keep the home. If you prioritize lower initial payments and plan to move or refinance within five years, a 5/6 ARM may be worth considering. But if you value certainty and long-term security, the 30-year fixed is likely the better option.
FAQ: 5/6 ARM vs 30-Year Fixed Jumbo Loan
What happens when the 5/6 ARM adjusts after 5 years?
The interest rate resets based on the loan’s index plus a margin and adjusts every six months thereafter, which can raise or lower your monthly payments
Are jumbo loans harder to qualify for?
Yes. Jumbo loans often require higher credit scores (700+), larger down payments (typically 20%+), and stronger income documentation.
Can I refinance a 5/6 ARM before the rate adjusts?
Absolutely. Many borrowers refinance before the first adjustment to lock in a better rate or change to a fixed mortgage
Read Next
- What Is a Jumbo Loan and Do You Qualify?
- Understanding Interest Rate Caps on ARMs
- Refinancing a Jumbo Loan: When and How
Get Expert Financing
- Matched with investor-friendly lenders
- Fast pre-approvals-no W2s required
- Financing options fro rentals, BRRRR, STRs
- Scale your portfolio with confidence
Our advice is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.
