An adjustable rate mortgage starts with a fixed rate for a set period, commonly 5, 7 or 10 years, then adjusts on a schedule based on a market index. ARMs can make sense when you expect to move or refinance before the fixed period ends.
Who it fits
Relocating in a few years
Buyers who expect to relocate within several years
Compare a fixed rateA starter home
Buyers of a starter home they plan to outgrow
First time buyersJumbo borrowers
Jumbo borrowers comparing every option
Jumbo loansComfortable with change later
Borrowers who understand and accept payment changes later
Mortgage glossaryHow it works
Every ARM has caps that limit how much the rate can rise at the first adjustment, at each later adjustment, and over the life of the loan. We walk through the worst case payment with you before you choose.
If your plans change, you can refinance into a fixed rate loan, subject to qualifying at that time.
Key facts
- Common types
- 5, 7 and 10 year fixed periods
- Caps
- Limit each adjustment and the lifetime maximum
- Best for
- Owners with a shorter time horizon
- Know before you choose
- Your worst case payment
Common questions
Is an ARM risky?
It carries payment risk after the fixed period. If you are confident you will sell or refinance before then, that risk may never reach you. If you plan to stay long term, a fixed rate is usually the safer choice.
What does 7/6 ARM mean?
The rate is fixed for 7 years, then adjusts every 6 months.
Can I refinance out of an ARM?
Yes, as long as you qualify at the time.
