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Adjustable-Rate Mortgage (ARM)

An adjustable-rate mortgage starts with a fixed rate that is often lower than a 30-year fixed, then adjusts periodically. It can be a smart choice if you plan to move or refinance within several years.

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What is an Adjustable-Rate Mortgage?

An ARM has an initial fixed period, commonly 5, 7 or 10 years, followed by rate adjustments based on a market index plus a set margin. A 7/6 ARM, for example, is fixed for seven years and then adjusts every six months. Caps limit how much the rate can change at each adjustment and over the life of the loan.

Lower initial rate

Start with a rate that is often below fixed-rate options.

Rate caps

Built-in limits on how much your rate can rise.

Flexible terms

Choose 5, 7 or 10-year initial fixed periods.

Refinance option

Move to a fixed rate later if it makes sense.

Is an Adjustable-Rate Mortgage right for you?

Who it is for

  • Buyers who expect to move or refinance within 5 to 10 years
  • Borrowers who want a lower starting rate
  • Jumbo and luxury buyers

Benefits

  • Lower initial rate than most fixed loans
  • Fixed period of 5, 7 or 10 years
  • Rate caps limit how much it can change
  • Can lower payments when rates fall

Things to consider

  • Payment can rise after the fixed period
  • Harder to budget long term
  • Qualifying may use a higher rate than your start rate

Everything about the Adjustable-Rate Mortgage

Choose a topic to jump to the details.

How adjustments workUnderstanding rate capsWhen an ARM makes senseAdjustable-Rate Mortgage (ARM) FAQs

How adjustments work

After the fixed period, your new rate equals an index plus a margin, subject to caps. Your loan documents list the index, margin and every cap so you know the worst case in advance.

Back to topics

Understanding rate caps

ARMs typically have three caps: one for the first adjustment, one for each later adjustment and one for the life of the loan. We will show you the maximum possible payment before you commit.

ARMs are described with numbers like 5/6 and caps like 2/1/5:

  • 5/6 means the rate is fixed for 5 years, then adjusts every 6 months
  • The first number in the cap is the most the rate can rise at the first adjustment
  • The second is the most it can rise at each later adjustment
  • The third is the most it can ever rise above the start rate

After the fixed period, the rate equals an index such as SOFR plus a set margin, within those caps.

Back to topics

When an ARM makes sense

ARMs fit buyers who expect to sell, relocate or refinance before the fixed period ends, and jumbo borrowers who want lower initial payments.

If you are confident you will sell or refinance before the fixed period ends, an ARM can save meaningful money. We will show you the worst-case payment so you know the risk before you choose.

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How to apply

  1. 1

    Request a call back

    Tell us about your goals. A loan officer will confirm whether this program is the right fit.

  2. 2

    We prepare the application

    We fill out the application with you and send a secure list of documents to upload.

  3. 3

    Approval and closing

    We handle appraisal, underwriting and title, keeping you updated by phone, text or email.

Documents to have ready

  • Standard income, asset and credit documents for the loan program you choose

Every file is different. Your loan officer will send an exact list.

Adjustable-Rate Mortgage FAQs

Have a question that is not answered here? Ask a loan officer.

Can my payment go down?

Yes. If the index falls, your rate can adjust downward, subject to the loan's floor.

What does 7/6 mean?

Fixed for the first seven years, then adjusts every six months.

Can I refinance an ARM into a fixed rate?

Yes, as long as you qualify at the time.

Are ARMs risky?

They carry more payment uncertainty than a fixed loan, which is why caps and a clear plan matter.

Can I refinance out of an ARM?

Yes. Many borrowers refinance into a fixed rate before the first adjustment, subject to qualifying at that time.

Talk to a loan officer

Talk with us about an Adjustable-Rate Mortgage

Tell us a little about your plans. A licensed loan officer will call you, usually the same business day.

  • No cost and no obligation
  • We can fill out the application for you
  • Evening and weekend calls available

Prefer to call? (800) 592-8882

Related programs

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