What a Adjustable-Rate Mortgage (ARM) Is
An adjustable-rate mortgage offers a lower fixed rate for an initial period (commonly 5, 7, or 10 years), then adjusts periodically based on market indexes. For borrowers who plan to move or refinance before the fixed period ends, an ARM can save meaningfully.
Who It's For
- Buyers planning to sell or refinance within the fixed period
- Borrowers comfortable with future adjustment for a lower start
- Those buying in a high-rate environment expecting declines
- Higher-income borrowers with short-to-medium-term plans
How It Works
You get a fixed rate for the intro period (e.g. 7 years on a 7/6 ARM), typically lower than a comparable 30-year fixed. After that, the rate adjusts on a schedule within caps that limit movement. The strategy works best when your time horizon fits the fixed period.
Frequently Asked Questions
When does an ARM make sense?
When you expect to sell or refinance before the fixed period ends, or expect rates to fall. You capture the lower intro rate without holding the adjustable risk long-term.
How much can the rate change?
ARMs have caps limiting how much the rate can move at each adjustment and over the loan's life. We'll explain the specific caps on any ARM you consider.
Can I refinance out of an ARM later?
Yes — many borrowers refinance into a fixed loan before or during the adjustable period. There's no penalty in most cases, but we'll confirm for your loan.