Adjustable Rate Mortgage

An adjustable-rate mortgage (ARM) starts with a fixed interest rate for an initial period - often 5, 7, or 10 years - typically lower than a comparable 30-year fixed rate. After that period ends, the rate adjusts periodically based on market conditions, within limits set by the loan.

Today’s ARMs are built with far more consumer protection than the ARMs of the mid-2000s. Rate caps limit how much your rate can increase at each adjustment and over the life of the loan, so there’s a known ceiling on your worst-case payment. Lenders are also required to qualify borrowers based on their ability to repay, including at higher potential rates - not just the low introductory rate - which helps prevent the kind of payment shock that caused problems in the past.

This can be a good fit if you plan to sell or refinance before the fixed period ends, or if you expect your income to grow and want a lower payment early on. We’ll walk you through how the adjustments and caps work and what your rate could look like over time, so there are no surprises.