5% is an incredible deal for the total amount of man hours that have been and are being put into the engine. There are some differences, for example I believe if the end result is purely a video rendering that you made money from on youtube as an example, there is no royalty fee required. Software applications and games, do however require the 5% royalty. I recommend reading the FAQ for more info, and also read the legal EULA Frequently Asked Questions - Unreal Engine
For example, you’ll notice in the FAQ you can contact Epic Games to try and negotiate a different deal, if say for example you’re a large AAA studio at EA Games and a 5% royalty could actually be millions instead of $150 ($150 being the amount if you made exactly $3,000 as a total) It’s also 5% on gross, not net profits, so it would be 5% on the pre-tax net sales minus cost of sales. I haven’t finished a product to sell yet, and am by no means a tax expert though so please read and seek financial advisers if you’re serious about selling.
Also, keep in mind whatever money you make is also subject to the tax regulations of the country or state you currently live in, and also if you chose to sell on steam you’d also have steam or whatever publisher take a percentage (25%-30%, not sure?).
I’ve also read if you’re going to sell an actual game, it might be best both legally and for tax purposes to set yourself up as a legal business entity such as a Limited-Liability Company. (You can be a LLC even as one person) I believe this option helps protect you from say, being sued by some crazy person on the internet directly. They can only sue your company, not you, and thus the amount of money you paid yourself as a salary and your personal belongings/real-estate/etc. can’t be touched. It also gives you more options with how you pay yourself and deal with different methods of filing your taxes. Again, by noooooo means an expert this is just what I read online.
Long story short, 5% is the smallest piece of the pie you’re going to have to worry about, and for 5% you’re getting a heck of a lot in return. Best of luck!