Traditional Loan
Conventional ARM
An adjustable-rate mortgage starts with a fixed rate for a set number of years, often lower than a comparable fixed-rate loan, then adjusts. It can fit buyers who expect to sell or refinance before the fixed period ends.
- Common terms5/6, 7/6 and 10/6
- Initial rateFixed for the first 5, 7 or 10 years
- After thatAdjusts every 6 months, within caps
- FollowsFannie Mae and Freddie Mac guidelines
How It Works
Fixed at first, adjustable after.
An ARM has an initial fixed period, then a rate that moves with a market index plus a set margin. Caps limit how much the rate can change at each adjustment and over the life of the loan, but the rate and payment can rise.
- 01
We match the term to your plans
How long you expect to keep the home decides whether a 5, 7 or 10 year fixed period makes sense, or whether a fixed-rate loan is the safer choice.
- 02
We walk through the worst case
Before you choose, we show you the index, the margin, the caps and the highest payment the loan could reach, so you know the range before you commit.
- 03
We price ARM and fixed side by side
The gap between adjustable and fixed rates changes with the market. We compare both across our lenders so you can see what the initial savings are worth.
Program Highlights
Why buyers choose an ARM.
- Initial rate is often lower than a comparable fixed-rate loan
- Fixed periods of 5, 7 or 10 years, then adjustments every 6 months
- Caps limit each adjustment and the total change over the life of the loan
- Can be refinanced into a fixed rate later, if you qualify
- Available for primary homes, second homes and investment properties
- Rate and payment can rise after the fixed period ends
Common Questions
What buyers ask about adjustable-rate mortgages.
An adjustable-rate mortgage, or ARM, has an interest rate that is fixed for an initial period and then adjusts on a set schedule. After the fixed period, the rate is based on a market index plus a margin, so your payment can go up or down.
During the fixed period, the rate and principal and interest payment stay the same. When it ends, the lender adds the margin in your loan documents to the current index to set the new rate, subject to the caps. The rate then resets on the schedule in your loan, usually every 6 months on a conventional ARM.
The first number is how many years the rate stays fixed. The second number is how often it adjusts after that, in months. A 7/6 ARM is fixed for seven years, then adjusts every six months. Older loans were often written as 5/1, which adjusted once a year.
It depends on how long you keep the loan. A fixed rate gives you the same principal and interest payment for the life of the loan. An ARM can cost less in the early years, but the rate can rise later. If you expect to sell or refinance within the fixed period, an ARM may be worth a look. If not, a fixed rate is usually the safer choice.
Every ARM has caps, written in your loan documents, that limit how much the rate can rise at the first adjustment, at each adjustment after that and over the life of the loan. We show you the highest rate and payment your loan could reach before you commit.
Yes, if you qualify at the time. Refinancing depends on your credit, income, home value and rates when you apply, so it is not something to count on. Plan for the possibility that you keep the ARM through its adjustments.
General information only, not a commitment to lend. Loan programs, guidelines, interest rates and terms are subject to change without advance notice.
Compare ARM and fixed across 50+ lenders.
Tell us how long you plan to stay. We will show you the adjustable and fixed options side by side, including the worst case.