Adjustable-Rate Mortgage Loans
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What is an Adjustable Rate Loan?
Adjustable-Rate Mortgages (ARMs), also known as variable rate mortgages, have interest rates that adjust over time based on market conditions. ARMs are-loans that start off with a fixed rate for a specified number of years (usually 5, 7, or 10 years), after which, the interest rate is adjusted once per year depending on the loan terms. Generally, there are caps on how far up or down the interest rate can change.
Who should get an ARM?
While ARMs are technically 30-year loans, due to the unpredictability of future mortgage rates, ARMs are most attractive to those planning on owning their home for a short period of time because of the lower interest rate during the introductory period. For some, the lower initial interest rate could help to save money with reduced monthly payments.
To help you decide between an adjustable-rate or fixed-rate, check out our historical rates to see how interest rates are trending. Talk with one of our mortgage experts to discuss your loan options.
ARM terms that we offer
5/6 ARM
Fixed rate for the first 5 years, then the interest rate adjusts once every six months.
Apply Now7/6 ARM
Fixed rate for the first 7 years, then the interest rate adjusts once every six months.
Apply Now10/6 ARM
Fixed rate for the first 10 years, then the interest rate adjusts once every six months.
Apply NowNeed more help?
Get in touch with one of our experienced Mortgage Loan Experts.
Key benefits of ARMs
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ARM Interest rates are usually lower than 30-year fixed rates.
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ARM loans could reduce your monthly payment.
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Greater savings are achieved if interest rates decline.
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Caps on ARMs offer extra protection against volatile market conditions.
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Ideal if you plan to own your home for less than 10 years.
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Frequently Asked Questions
One of the main advantages of a variable-rate mortgage is the initial lower interest rate term, where your monthly mortgage interest and principal payment will remain the same for the initial period before a rate adjustment is set to take place. This allows for easier financial planning and budgeting because you’ll have an idea of how much your monthly principal and interest payments will be for a period of time.
Learn MoreYour choice between an ARM loan and a fixed-rate loan depends on your personal financial circumstances and risk tolerance. If you don’t plan on staying in your home for a long period of time, usually less than 10 years, then an ARM could be a good option to take advantage of the initial lower interest rate. However, if you want to know exactly how much you’ll be paying each month and prefer predictably, then a fixed-rate loan may be the better option. To help you decide between an adjustable-rate or fixed-rate, check out our historical rates to see how interest rates are trending and we recommend talking with one of our mortgage experts to discuss your loan options.
Yes, you can refinance an ARM loan. Refinancing can help you secure a lower interest rate or change the terms of your loan.
Get a rate quoteAn ARM home loan’s interest rate can fluctuate over time, which is usually based on an underlying index such as the prime rate, SOFR (Secured Overnight Financing Rate).
Below is a summary of how an ARM loan works:
Initial Period: ARM loans typically start with an initial fixed interest rate period, usually 5, 7, or 10 years. During this initial period, the interest rate remains unchanged, and the borrower makes fixed monthly payments.
Adjustment Period: After the initial period, the interest rate on the ARM loan will adjust based on changes to the underlying index. The adjustment period can be set to every six months, one year, or some other period. At each adjustment period, the interest rate on the loan will either increase, decrease, or remain the same, depending on changes in the index. Based on the adjusted interest rate, the borrower’s monthly payment will either increase, decrease, or remain the same.
To protect borrowers from large increases in interest rates, ARM loans typically have caps on how much the interest rate can adjust during each adjustment period and over the life of the loan. There are usually two types of caps: periodic caps, which limit the amount the interest rate can change during a single adjustment period, and lifetime caps, which limit the amount the interest rate can change over the entire life of the loan.
Margin: The margin is a fixed percentage point that is added to the index rate. For example, if the underlying index rate is 3% and the margin is 2%, the interest rate on the ARM loan would be 5%.
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